In Changing from the Cost Method to Consolidation, Which of the Following

question 22

Multiple Choice

In changing from the cost method to consolidation, which of the following is not required?

• A)Replacement of the "Investment in Subsidiary" account with the assets and liabilities of the subsidiary
• B)Elimination of intercompany transactions and balances
• C)Elimination of the subsidiary's share capital account
• D)Elimination of the subsidiary's retained earnings since acquisition

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Definitions:

Required Return

The minimum expected return on an investment needed by an investor, factoring in the risk associated with the investment.

Initial Cash Outflow

Initial cash outflow refers to the amount of money a business or investor must spend upfront to initiate a project, investment, or acquisition.

Cash Inflows

The total amount of money being transferred into a business, typically from operational, investment, and financing activities.

Profitability Index

A calculation used to determine the relative profitability of an investment, defined as the present value of future cash flows divided by the initial investment cost.