When a Parent Uses the Equity Method Throughout the Year

question 5

Multiple Choice

When a parent uses the equity method throughout the year to account for investment in a subsidiary,which of the following statements is false before making adjustments on the consolidated worksheet?

• A)Parent company net income equals controlling interest in 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 equals consolidated dividends
• E)Goodwill may need to be recorded

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Definitions:

Spot Price

The current market price at which a particular asset, like a commodity or currency, can be bought or sold for immediate delivery.

Wheat Future

A standardized contract traded on futures exchanges to buy or sell a specific amount of wheat at a predetermined price on a specified future date.

Profit

Profit refers to the financial gain that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Corn Future

A standardized contract to buy or sell a specified amount of corn at a future date and price, traded on commodities exchanges.