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:

Lien

A legal right or claim against a property by a creditor to ensure the payment of a debt.

Rescission

The revocation of a contract or agreement.

Damages

Monetary compensation required to be paid as a result of loss or injury due to a breach of contract or a tort.

Standard Form Contract

A pre-prepared contract where most terms are set in advance with little or no negotiation between parties, typically favoring the drafter of the contract.