When a Parent-Subsidiary Relationship Exists Between Two Companies

question 45

Multiple Choice

When a parent-subsidiary relationship exists between two companies:

• A) the parent company must use the cost method to account for the subsidiary
• B) the parent company will keep one set of accounting records covering both companies
• C) the subsidiary company will keep one set of accounting records covering both companies
• D) both the parent and the subsidiary will continue to keep their own separate accounting records as if the parent-subsidiary relationship does not exist

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Definitions:

Insider Trading

Trading in the stock of a publicly listed corporation based on inside information. One who possesses inside information and has a duty not to disclose it to outsiders may not profit from the purchase or sale of securities based on that information until the information is available to the public.

Publicly Listed

A company whose shares are traded openly on a stock exchange.

Financial Status

Financial Status refers to the current state of an individual's or entity's monetary resources and liabilities.

Racketeer Influenced and Corrupt Organizations Act (RICO)

A U.S. federal law designed to combat organized crime by enabling the prosecution of criminal organizations for their collective criminal activities.