A Parent Company Uses the Equity Method to Record Its

question 33

Multiple Choice

A parent company uses the equity method to record its investment in its subsidiary. To check the balance of the consolidated retained earnings, what amount should be added to the parent company's separate-entity retained earnings?

• A)Balance of the equity in the earnings of the subsidiary account
• B)Net income from the subsidiary company's separate-entity statement of income
• C)Balance of the investment account
• D)Increase in the balance of the investment account

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Definitions:

Joint Venturer

is an entity that engages in a joint venture, sharing control, resources, and risks with other ventures.

One-Line Method

A method used in accounting to consolidate a parent company's investment in a subsidiary when only a minority interest is owned.

Joint Control

A situation in corporate governance where two or more parties agree to share control over a business activity, ensuring decisions are made unanimously.

Deferred Exploration Expenditure

Costs incurred in the exploration of resources which are not immediately expensed but are capitalized and amortized over time.