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3 years ago

Multiple-Choice Questions on Consolidation Overview [AICPA Adapted]

Business

1 answer:

boyakko [2]3 years ago

4 0

Answer: 1. D. Economic entity

2. C. Circumstances prevent the exercise of control.

3. B. Consolidation used for both Sell and Vane.

4. B. In form, the companies are separate; in substance, they are one entity

Explanation:

1. When a parent–subsidiary relationship exists, it can be infered that consolidated financial statements will be prepared in recognition of the accounting concept of economic entity.

2. Consolidated financial statements are prepared when one company has a controlling interest in another unless the circumstances prevent the exercise of control.

3. Based on the information given, in Penn’s consolidated financial statements, it should be noted that Sell and Vane should be consolidated. Therefore, the correct option is B.

4. The best theoretical justification for consolidated financial statements is that in form, the companies are separate while in substance, they are regarded as one entity.

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The correct answer is $2,000.

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3 years ago

Percent of Sales Method At the end of the current year, Accounts Receivable has a balance of $430,000; Allowance for Doubtful Ac

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Answer:

1. Determine the amount of the adjusting entry for uncollectible accounts. $850

Dr Bad debt expense 850

Cr Allowance for doubtful accounts 850

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accounts receivable $430,000
allowance for doubtful accounts $4,850
bad debt expense $4,850

3. Determine the net realizable value of accounts receivable.

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accounts receivable balance $430,000

allowance for doubtful accounts balance $4,000

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