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Consolidation Entries in Subsidiary Accounting

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Consolidation Entries in Subsidiary Accounting

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Questions and Answers

What is the main difference between Entry I and the equity method?

Is not used for consolidation subsequent to the year of acquisition
Does not accrue subsidiary income
Eliminates the Dividends Declared account
Eliminates the parent's equity in the sub's income and reduces the Investment account (correct)

What is the purpose of worksheet Entries I and D?

To eliminate the parent's equity in the sub's income and reduce the Investment account (correct)
To convert the parent's beginning-of-the-year retained earnings balance to a full-accrual basis
To accrue subsidiary income
To record dividends declared

What is the limitation of the parent's record-keeping in the partial equity method?

Requires four periodic journal entries
Requires the use of the cash basis for income recognition
Does not account for retained earnings
Is limited to two periodic journal entries (correct)

What is the result of using the partial equity method?

A partial accrual-based measure of income and retained earnings (D) Signup and view all the answers

What is the purpose of the initial value method?

To use the cash basis for income recognition of dividends (B) Signup and view all the answers

What is the main difference between the partial equity method and the equity method?

The partial equity method eliminates the parent's equity in the sub's income (A) Signup and view all the answers

What is the requirement for consolidated financial statements?

A full accrual-based measure of income and retained earnings (C) Signup and view all the answers

What is the impact of the parent's internal accounting method on the consolidated financial statements?

It has no effect on the resulting consolidated financial statements (A) Signup and view all the answers

What is the purpose of new worksheet adjustments?

To convert the parent's beginning-of-the-year retained earnings balance to a full-accrual basis (D) Signup and view all the answers

What is the main difference between Entries S, A, and E?

They are used for different methods of consolidation (A) Signup and view all the answers