Using the Fully Adjusted Equity Method,an Intercompany Gain on an Upstream

question 26

Multiple Choice

Using the fully adjusted equity method,an intercompany gain on an upstream sale of land is:

• A)recognized by the parent and the deferral is shared between the controlling and noncontrolling stockholders of the subsidiary.
• B)recognized by the subsidiary and the deferral is shared between the controlling and noncontrolling stockholders of the subsidiary.
• C)deferred by the subsidiary until the land is sold to an entity outside the consolidated group.
• D)recognized by the subsidiary and the deferral is completely allocated to the controlling stockholders of the subsidiary.

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Definitions:

Condorcet Paradox

A situation in social choice theory where collective preferences can be cyclic (not transitive) despite the transitive preferences of individual voters.

Majority Rule

A decision-making principle where the preferences or decisions supported by more than half of the participants are adopted.

Transitive Preferences

A condition in decision-making where if an individual prefers option A over option B and prefers option B over option C, then the individual also prefers option A over option C.

Median voter theorem

A theory suggesting that the outcome of a majority rule voting system will represent the preferences of the median voter.