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.

---

Definitions:

Functional Currency

The currency of the primary economic environment in which an entity operates and carries out its business activities.

Exchange Rates

The ratio at which one currency may be swapped for another, affecting global commerce and economic activities.

Investment in Martin

A specific financial investment made in a company or entity named Martin, denoting ownership or interest.

Net Income

The amount of profit remaining after all operating expenses, taxes, and interest payments are deducted from total revenue.