When Consolidating a Subsidiary Under the Equity Method,which of the Following

question 76

Multiple Choice

When consolidating a subsidiary under the equity method,which of the following statements is true subsequent to the year of acquisition?

• A)All net assets are revalued to fair value and must be amortized over their useful lives.
• B)Only net assets that had excess fair value over book value when acquired by the parent must be amortized over their useful lives.
• C)All depreciable net assets are revalued to fair value at date of acquisition and must be amortized over their useful lives.
• D)Only depreciable net assets that have excess fair value over book value must be amortized over their useful lives.
• E)Only assets that have excess fair value over book value must be amortized over their useful lives.

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Definitions:

Contribution Margin

The residual sum from sales income once variable expenses are subtracted, showing the extent to which it helps cover fixed expenses and create profit.

Variable Costs

Expenses that change in proportion to the activity of a business, such as utility costs that increase with higher production levels.

Fixed Costs

Costs that remain constant regardless of how much is produced or sold, including expenses like rent, salaries, and insurance.

Relevant Range

The span of activity or volume where the specific assumptions of cost behavior are considered valid.