Which of the Following Observations Is NOT True

question 46

Multiple Choice

Which of the following observations is NOT true?

• A)The differential account is a clearing account.
• B)A clearing account can reduce the chance of error in preparing consolidated statements.
• C)Eliminating entries remove the balance in the investment account from the parent's books.
• D)The differential continues to be a part of the investment account balance until fully amortized.

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Definitions:

Basic Assumptions

Fundamental beliefs or principles that underlie the financial accounting system, including economic entity, monetary unit, time period, and going concern.

Internal Growth Rates

The maximum rate at which a company can expand using only internal financial resources without resorting to borrowing or seeking new equity investment.

External Financing Needs (EFN)

The amount of funding a business requires from external sources to finance its planned growth or expansion activities.

Negative EFN

External Financing Needed; a scenario where a negative value indicates a surplus of funds, implying no external financing is required for growth or operations.