The Statements of Financial Position for Company P and Company

question 5

Multiple Choice

The Statements of Financial Position for company P and company S are shown below:

At the time of the acquisition,the net asset value of S was £50,000.This was £40,000 share capital plus £10,000 retained earnings.If company P owns 75% of Company S,then the consolidated Statement of Financial Position will include:

• A) 100% of the assets and liabilities of P and 75% of the assets and liabilities of S
• B) 100% of the assets and liabilities of P and 50% of the assets and liabilities of S
• C) 100% of the assets and liabilities of P and 100% of the assets and liabilities of S
• D) 75% of the assets and liabilities of P and 75% of the assets and liabilities of S

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Definitions:

Supremacy Clause

A clause in the U.S. Constitution stating that federal law is the "supreme Law of the Land" and takes precedence over state laws.

Federalism

A system of government in which power is divided between a central authority and constituent political units, such as states in the U.S.

Unitary

Refers to a centralized governmental structure where local or provincial divisions have little independent power outside the central authority's directives.

Confederal

Relating to a confederation, which is an alliance between sovereign states, where the central authority has limited powers and the member states retain a high degree of autonomy.