Question

In general, consolidated financial statements should be prepared a.when a corporation owns more than 50% of the common stock of another company b.when a corporation owns more than 20% and less than 40% of the common stock of another company c.whenever the market value of the stock investment is significantly lower than its cost d.only when a corporation owns 100% of the common stock of another company

Answer 1

Answer:

a.when a corporation owns more than 50% of the common stock of another company

Explanation:

Many a times, a parent company holds stock in it's own subsidiary company. Consolidation refers to presentation of combined profitability of a group wherein a Parent Co holds majority of the common stock i.e more than 50% of the common stock in it's subsidiary.

Such a presentation presents the combined picture of a group and helps in better comprehension and understanding by the users of the financial statements.

If a parent owns 100% stock in it's subsidiary, such subsidiary is referred to as a wholly owned subsidiary.