When Consolidating a Subsidiary Under the Equity Method, Which of the Following

question 87

Multiple Choice

When consolidating a subsidiary under the equity method, which of the following statements is true with regard to the subsidiary subsequent to the year of acquisition?

• A) All net assets are revalued to fair value and must be amortized over their useful lives.
• B) Only net assets that had excess fair value over book value when acquired by the parent must be amortized over their useful lives.
• C) All depreciable net assets are revalued to fair value at date of acquisition and must be amortized over their useful lives.
• D) Only depreciable net assets that have excess fair value over book value must be amortized over their useful lives.
• E) Only assets that have excess fair value over book value must be amortized over their useful lives.

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Definitions:

Annual Bond Interest

The total interest that will be earned on a bond over the course of a year.

Face Value

The nominal or principal value of a financial instrument as stated by the issuer, typically used for bonds or currency notes.

Interest Expense

The cost incurred by an entity for borrowed funds, represented as an expense on the income statement.

Market Rate

The current price or interest rate at which securities, commodities, or currencies can be bought or sold in a marketplace.