When Consolidating a Subsidiary That Was Acquired on a Date

question 14

Multiple Choice

When consolidating a subsidiary that was acquired on a date other than the first day of the fiscal year,which of the following statements is true in the presentation of consolidated financial statements?

• A)Purchased pre-acquisition earnings are deducted from combined revenues and expenses
• B)Purchased pre-acquisition earnings are added to combined revenues and expenses
• C)Purchased pre-acquisition earnings are deducted from the beginning consolidated stockholders' equity
• D)Purchased pre-acquisition earnings are added to the beginning consolidated stockholders' equity
• E)Purchased pre-acquisition earnings are ignored on the consolidated income statement

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Definitions:

Price-Fixing

An illegal agreement among competitors to fix prices, restrict production, or manipulate market conditions.

Prices

The sum of money anticipated, needed, or provided as compensation for something.

Agreements

Mutual understandings or arrangements between two or more parties that create enforceable obligations or contracts.

Clayton Act

A U.S. antitrust law, enacted in 1914, aimed at promoting fair competition by prohibiting certain business practices that could lead to monopoly or restraint of trade.