A Company Has a Subsidiary That Has an Intangible Capital

question 36

Multiple Choice

A company has a subsidiary that has an intangible capital asset. It has not been recorded on the subsidiary's books, but at the date of acquisition, the asset had a fair value of $200,000 and an indefinite economic life. How should the company show the asset on its consolidated statement of financial position?

• A)$200,000 less any impairment losses
• B)$200,000 less accumulated amortization (calculated over 10 years)and any impairment losses
• C)$200,000 less accumulated amortization (calculated over 40 years)and any impairment losses
• D)The company should not show the asset on the consolidated financial statement as the subsidiary does not do so.

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Definitions:

Yield To Maturity

The total return anticipated on a bond if it is held until it matures, including all payments of interest and principal.

Semi-Annually

This term describes events or processes, such as interest payments or calculations, that occur twice a year.

Face Value

The nominal or dollar value printed on a security or a financial instrument, such as a bond or stock.

Annual Coupon Bonds

Bonds that pay interest to the bondholder yearly until maturity, at which point the face value is also repaid.