When a Parent Uses the Partial Equity Method Throughout the Year

question 99

Multiple Choice

When a parent uses the partial equity method throughout the year to account for its 80% investment in an acquired subsidiary, which of the following statements is true at the date immediately preceding the date on which adjustments are made on the consolidated worksheet?

• A) Parent company net income equals consolidated net income.
• B) Parent company retained earnings equals consolidated retained earnings.
• C) Parent company total assets equals consolidated total assets.
• D) Parent company dividends equal consolidated dividends.
• E) Goodwill is recorded on the parent's books.

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Definitions:

Liquidation Preference

A term in financial agreements that specifies the order in which creditors and investors are paid in the event of a company's liquidation.

Judicial Dissolution

A legal process through which a court orders the dissolution or termination of an entity such as a corporation or partnership based on certain grounds laid by law.

Deadlocked Directors

A situation in a board of directors where members are evenly divided on an issue, preventing a decision from being made.

Irreparable Injury

Harm that cannot be adequately remedied or compensated by monetary damages, thus potentially justifying injunctive relief.