DIY LtdOwns 20 Subsidiary Companies

question 27

Multiple Choice

DIY Ltd.owns 20 subsidiary companies.Most of the subsidiaries are hardware stores operating in rural areas.One of the subsidiaries has been having financial difficulties and has finally decided to cease operations.Which of the following statements about DIY's consolidated financial statements is true?

• A)DIY should report this as a discontinued operation.
• B)DIY should report any losses from this as part of its normal operating activities.
• C)Whether DIY treats this as a discontinued operation or not depends on if it used the cost method or the equity method to record the subsidiary.
• D)DIY is not required to disclose anything about this closure.

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Definitions:

CFO

Chief Financial Officer; a senior executive responsible for managing the financial actions of a company.

Costs and Expenses Forecast

An estimate of future costs and expenses that a business expects to incur over a specific period, often used for budgeting and financial planning purposes.

Additional Shifts

Extra work periods added to a company's regular schedule to increase production or cover demand.

Financial Plan

A comprehensive evaluation of an individual's or organization's current pay and future financial state by using current known variables to predict future income, asset values, and withdrawal plans.