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:

Common Stock

Shares of ownership in a corporation that grant holders voting rights and a share of the company’s profits through dividends.

Long-Term Investment

Investments a company intends to hold for more than one year, typically including stocks, bonds, or real estate.

Investment Income

Investment income refers to the revenue generated from holding financial assets, including dividends, interest, and capital gains.

Long-Term Investment

Investments in assets or securities that a company intends to hold for a period longer than one year.