When a Parent Entity Has Previously Held an Investment in a Subsidiary

question 22

Multiple Choice

When a parent entity has previously held an investment in a subsidiary prior to gaining control the effect on the consolidation process is as follows:

• A)there is no impact
• B)the change in the fair value of the previously held interest is recognised in profit or loss
• C)the change in the fair value of the previously held interest is recognised in retained earnings
• D)the change in the fair value of the previously held interest is recognised in other comprehensive income

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Definitions:

Manufacturing Overhead Variance

The difference between the actual manufacturing overhead costs incurred and the overhead costs allocated to the production process based on a predetermined rate.

Direct Labor Hours

The cumulative working hours of employees directly engaged in the production process.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production, based on a specific activity (e.g., labor hours or machine hours).

Labor Price Variance

The difference between the actual cost of labor and the budgeted or standard cost, often analyzed in cost accounting.