If the Parent Company Uses the Equity Method to Record

question 35

Multiple Choice

If the parent company uses the equity method to record its investment in a subsidiary in its internal accounting records, which of the following statements is FALSE?

• A) The parent's net income equals consolidated net income.
• B) The parent's retained earnings will be equal to consolidated retained earnings.
• C) Only the parent's share of the subsidiary's income, dividends and amortization of acquisition differential are recorded in the investor's records.
• D) The parent's net income equals consolidated net income attributable to the shareholders of the parent.

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Definitions:

Net Income

The remaining income of a company after deducting expenses and taxes from the total income generated.

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a dataset, often used in accounting and inventory valuation.

Accounting Principle

Fundamental guidelines or rules that govern how financial statements are prepared and presented.

Fasb

The Financial Accounting Standards Board, an organization that establishes accounting and financial reporting standards for companies and nonprofits in the United States.