When Preparing a Set of Consolidated Financial Statements, the Pre-Acquisition

question 13

Multiple Choice

When preparing a set of consolidated financial statements, the pre-acquisition entry relates to:

• A) both the parent and the non-controlling interest in the subsidiary;
• B) only the investment by the parent in the subsidiary;
• C) only the investment by the non-controlling interest in the subsidiary;
• D) the total investment by the parent in the subsidiary plus the after tax effect of the investment by the non-controlling interest.

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Definitions:

Present Value

The current price of a future sum of money or stream of cash flows, discounted at a certain rate of return.

Cash Flow

The complete inflow and outflow of cash and equivalent financial assets within a business framework.

Future Value Formula

A mathematical equation used to calculate the future value of an investment based on its current value, the interest rate, and the time period of the investment.

Compounded Monthly

The process where interest earned on an investment is added to the principal each month, with future interest then earned on the new total.