Question

When a parent uses the equity method throughout the year to account for its 80% investment in an acquired subsidiary, which of the following statements is false at the date immediately preceding the date on which adjustments are made on the consolidated worksheet?
a. Parent company net income equals controlling interest in consolidated net income.b. Parent company retained earnings equals consolidated retained earnings.c. Parent company total assets equals consolidated total assets.d. Parent company dividends equals consolidated dividends.e. Goodwill will not be recorded on the parent's books.

Answer 1

Answer:

c. Parent company total assets equals consolidated total assets

Explanation:

• The equity method is a process of treating investment in an associated companies and is usually applied where the investor holds about 50% of the companies stocks and this has a significant influence in the later management.

• They are recorded in the balance sheets and are associated with the companies net incomes and investments. If 80% of the investment is accounted for the subsidiary then the parent company total assess will not be equal o the total assets as it involves taxes.