A Parent Company Can Record an Investment in Its Subsidiary

question 26

Multiple Choice

A parent company can record an investment in its subsidiary under either the cost or equity method.Which of the following statements about consolidated net income is true?

• A)Consolidated net income is higher if the parent company uses the equity method rather than the cost method.
• B)Consolidated net income is higher if the parent company uses the cost method rather than the equity method.
• C)Consolidated net income is higher if the parent company uses the equity method only if the subsidiary is profitable and has not paid any dividends.
• D)Consolidated net income is the same under both methods.

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