When Preparing a Consolidation Worksheet for a Parent and Its

question 40

Multiple Choice

When preparing a consolidation worksheet for a parent and its foreign subsidiary accounted for under the equity method, which of the following statements is false?

• A) The cumulative translation adjustment included in the Investment in Subsidiary account is eliminated.
• B) The excess of fair value over book value since the date of acquisition is revalued for the change in exchange rate.
• C) The amount of equity income recognized by the parent in the current year is eliminated.
• D) The allocations of excess of fair value over book value at the date of acquisition are eliminated.
• E) The subsidiary's stockholders' equity accounts as of the beginning of the year are eliminated.

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Definitions:

Hypothetical-deductive reasoning

A method of problem-solving or decision-making that starts with a hypothesis or a proposed explanation, then deduces logical consequences to test the hypothesis.

Logical implications

The relationship between statements where the truth of one indicates the truth of another; foundational in reasoning and argumentation.

Premises

Buildings and land owned or occupied by a person or organization.

Formal operational thinking

A stage in Jean Piaget's theory of cognitive development, starting around age 12, where individuals gain the ability to think abstractly and logically.