AKL I - Ch 4

Under the equity method, the change in the investment account over a period is equal to:

• The difference between income from a subsidiary recognized on the parent’s book and dividends received from the subsidiary

• The difference between dividends received from a subsidiary and income from the subsidiary recognized on the parent’s book

• The sum of income from a subsidiary recognized on the parent’s book and dividends received from the subsidiary

• The sum of dividends received from a subsidiary and its net income

The portion of a subsidiary’s net income that is not given to the parent is called:

• Noncontrolling interest

• Noncontrolling interest share

• Income from subsidiary

• Controlling interest share

The portion of a subsidiary’s share that is not owned by the parent is called:

• Noncontrolling interest

• Noncontrolling interest share

• Income from subsidiary

• Controlling interest share

Net profit on consolidation workpapers is:

• Adjusted under all circumstances

• Adjusted when the parent uses the cost method

• Adjusted when the parent uses the equity method

• Not an account balance and, therefore, not subject to adjustment

On consolidation workpapers, individual stockholders’ equity accounts of a subsidiary are:

• Eliminated

• Eliminated only to the extent of noncontrolling interest

• Added to parent stockholders’ equity accounts

• Eliminated to the extent of the parent’s interest

On consolidation workpapers, the controlling share of consolidated net income is determined by:

• Subtracting noncontrolling interest share from parent’s net income

• Adding net income of the parent and subsidiary

• Making adjustment to the parent’s income

• Deducting consolidated expenses and noncontrolling interest share from consolidated revenue

On consolidation workpapers, the investment in subsidiary account balances are:

• Always eliminated

• Carried forward to the consolidated balance sheet

• Eliminated when the financial statement approach is used

• Allocated between controlling and noncontrolling stockholders

On consolidation workpapers, consolidated ending retained earnings is determined by:

• Adding beginning consolidated retained earnings and the controlling share of consolidated net income and subtracting parent dividends

• Adding end-of-the-period retained earnings of the affiliates

• Adjusting beginning parent-retained earnings for subsidiary profits and dividends

• Adjusting the parent’s retained earnings account balance

Under the trial balance approach to consolidation workpapers, which of the following is used?

• Unadjusted trial balances

• Adjusted trial balances

• Postclosing trial balances

• Either a or b, depending on the circumstances

Most mistakes made in consolidating financial statements appear when:

• Consolidated net income does not equal parent net income

• The consolidated balance sheet does not balance

• The total of the adjustment column does not equal the total of the elimination column

• The amount of retained earnings on the balance sheet does not equal the amount on the retained earnings statement