Practice: Consolidation Quiz Quiz | Financial Accounting & Reporting (FAR)

Question 1

What is the primary objective of preparing consolidated financial statements?

Answer

To maximize reported earnings

Answer

To present the parent and subsidiary as a single economic entity

Answer

To eliminate all liabilities

Answer

To reduce taxable income

Question 2

A parent company generally must consolidate a subsidiary when it owns:

Answer

Less than 20% of voting shares

Answer

20% to 50% of voting shares

Answer

More than 50% of voting shares or otherwise has control

Answer

Exactly 50% of voting shares only

Question 3

Which accounting method is required for business combinations under U.S. GAAP?

Answer

Pooling-of-interests method

Answer

Cost method

Answer

Equity method

Answer

Acquisition method

Practice Quiz