Exam 1: Wholly Owned Subsidiaries: at Date of Creation

_____ Pixco (publicly owned) controls Sixco. Pixco could justifiably not consolidate Sixco if:

It may be necessary to consolidate a company in which a publicly owned investor company does not own a majority voting interest.

The only way to determine whether control exists is by determining whether a majority of the voting common stock is owned.

It is appropriate to consolidate foreign subsidiaries.

The process of combining the financial statements of a parent and a subsidiary is called _______________________________________.

_____ Which of the following is not a required consolidation disclosure?

When a subsidiary in a different line of business from that of the parent is consolidated, the separate financial statements of the subsidiary must be presented in the notes to the consolidated statements.

At the date of creation, the parent's Investment in Subsidiary account balance has a(n) ________________________ relationship to the total balance of the subsidiary's equity accounts.

Consolidated financial statements are ______________________________________ statements.

When a subsidiary's restricted net assets are more than 25% of consolidated net assets, the Securities and Exchange Commission does not allow that subsidiary to be consolidated.

Intercompany accounts and reciprocal accounts are interchangeable terms.

Reciprocal account balances are created as a result of the consolidation process.

_____ For 2004 a branch reported $18,000 of profit. In the combining worksheet at year-end, the Home Office Capital account had a balance of $60,000 in the balance sheet. The basic elimination entry would include which of the following individual postings?

The disaggregated format of presenting consolidated statements is required if the subsidiary is in an unrelated line of business from the parent and its other subsidiaries.

In selecting the form of organization for a new operation to be established, an expanding company would consider income tax considerations for domestic expansion to be far more important than for foreign expansion.

The presumption that consolidated statements are more meaningful than separate statements and are necessary for a fair presentation can be overcome by an assertion to the contrary by management in the notes to the financial statements.

A major disadvantage of a centralized accounting system is that the profitability of branch operations cannot be determined because branch operations are not accounted for in a separate general ledger.

The Investment in Branch accounting has a balance that equals the ____________ ______________________ account of the branch.

_____ Which of the following accounts is a reciprocal account to the Investment in Branch account?

_____ For 2004 a branch reported $18,000 of profit. In the combining worksheet at year-end, the Home Office Capital account had a balance of $60,000 in the balance sheet. The basic elimination entry would include which of the following individual postings?