In the Preparation of Consolidated Financial Statements,the Measurement of a Minority

question 20

Multiple Choice

In the preparation of consolidated financial statements,the measurement of a minority interest in the shareholders' equity of a subsidiary at the reporting date may be affected by:

• A) Management fees charged to the subsidiary by the parent entity.
• B) Unrealised profits arising from sales of inventories in the previous period by the subsidiary to another subsidiary in the same group.
• C) Consolidation adjustments made against the retained earnings of the subsidiary at the end of the previous period.
• D) None of the above.

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Definitions:

Raw Materials

The basic materials from which a product is made, used in the early stages of the production process.

Work in Process

Inventory that includes materials that have been partially completed, but not yet ready for sale.

Indirect Materials

These are materials used in the production process that cannot be directly linked to a specific product, such as lubricants for machines.

Overapplied

Refers to the condition where the allocated manufacturing overhead cost exceeds the actual manufacturing overhead cost.