If the Book Value of Net Assets of a Subsidiary

question 30

Multiple Choice

If the book value of net assets of a subsidiary are less than the fair market value of net assets of the subsidiary at the time the subsidiary is acquired,which of the following procedures is incorrect with respect to the subsidiary,parent,and consolidated accounts?

• A)Only on consolidation are the book values of the subsidiary accounts written up to their revised fair market values.
• B)The parent records the difference between the subsidiary's book value of net assets and its fair market value of net assets as a separate asset on the parent's balance sheet.
• C)The subsidiary continues as a going concern with its accounts valued at the lower book value amounts.
• D)The parent records the acquisition of the subsidiary at its acquisition cost.
• E)Any part of the acquisition price that cannot be attributed to the revised fair market value of the subsidiary's assets and liabilities will be considered goodwill on the consolidated balance sheet.

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