When a Parent Uses the Initial Value Method Throughout the Year

question 24

Multiple Choice

When a parent uses the initial value method throughout the year to account for its investment in an acquired subsidiary, which of the following statements is true before making adjustments on the consolidated worksheet?

• A) Parent company net income equals consolidated net income.
• B) Parent company retained earnings equals consolidated retained earnings.
• C) Parent company total assets equals consolidated total assets.
• D) Parent company dividends equal consolidated dividends.
• E) Goodwill needs to be recognized on the parent's books.

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Definitions:

Average Cost Pricing

A pricing strategy where the price is set based on the average cost of production, including fixed and variable costs, to cover expenses and generate profits.

Open Access Resource

A resource that is not owned by anyone, is free for use by anyone, and typically subject to overuse and degradation.

Ocean Fisheries

The harvesting sector of the ocean's natural aquatic life for human consumption and industrial use.

Over-exploited

Refers to the excessive use or extraction of a resource to the point where it is depleted or seriously degraded.