All of the Following Statements Regarding the Sale of Subsidiary

question 4

Multiple Choice

All of the following statements regarding the sale of subsidiary shares are true except which of the following?

• A) The use of specific identification based on serial number is acceptable.
• B) The use of the FIFO assumption is acceptable.
• C) The use of the averaging assumption is acceptable.
• D) The use of specific LIFO assumption is acceptable.
• E) The parent company must determine whether consolidation is still appropriate for the remaining shares owned.

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Definitions:

Firm's Assets

Resources owned by a company that have economic value and can provide future benefits.

Holding Company

A corporation that owns enough voting stock in another company to control its policy and management.

Conglomerate Merger

A type of merger involving companies that are involved in totally unrelated business activities, aiming for diversification.

Horizontal Merger

A merger between companies operating in the same industry, often as competitors offering similar products or services.