In Which of the Following Cases Would Consolidation Be Inappropriate

question 14

Multiple Choice

In which of the following cases would consolidation be inappropriate?

• A)The subsidiary is in bankruptcy.
• B)Subsidiary's operations are dissimilar from those of the parent.
• C)The parent owns 90 percent of the subsidiary's common stock,but all of the subsidiary's nonvoting preferred stock is held by a single investor.
• D)Subsidiary is foreign.

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Definitions:

Activity-Based Costing

A method of accounting where costs are assigned based on the activities and processes that contribute to the production of a product or service.

Activity Cost Pool

A grouping of all the costs associated with a particular activity, used in activity-based costing.

Cost Allocation Base

A method or factor used to assign costs in an equitable manner to various cost objects like departments, products, or projects.

Departmental Overhead Rate

A rate used to allocate overhead costs to individual departments based on relevant criteria, such as direct labor hours or machine hours.