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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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Sparkling Water, Inc., expects to sell 3.7 million bottles of drinking water each year in perpetuity. This year each bottle will

MrRa [10]

Answer:

$39,345,664.93

Explanation:

The computation of the company worth today is as follows:

Present value of revenues after tax is

= $3,700,000 × 1.46 × (1 - 0.25) ÷ (0.07 - 0.018)

= $77,913,461.54

And, Present value of costs after tax is

= $3,700,000 × 0.82 × (1 -0.25) ÷ (0.07-0.011)

= $38,567,796.61

So, the company worth today is

= $77,913,461.54 - $38,567,796.61

= $39,345,664.93

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3 years ago

When the price level is falling to a negative zone, the economy is experiencing?

Rasek [7]

When the price level is falling to a negative zone, the economy is experiencing deflation, I believe.

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3 years ago

Dan sells newspapers. Dan says that a 8 percent increase in the price of a newspaper will decrease the quantity of newspapers de

ivann1987 [24]

Answer:

For Dan, the demand is price inelastic

Explanation:

One of the factors tat affect the quantity demand for a product is the price of the product. According to the law of demand, at lower price more quantity of a product would be purchased than at a higer price, all other this being being equal.

Price elasticity of Demand (PED)

The extent to which a change in price will cause a change in the quantity demand for a product is called the price elasticity of demand. It measures the degree of responsiveness of quantity demand to a change in price.

It is calculated as

PED =% change in quantity demand / % change in price.

For Dan Newspaper , the price elasticity of demand

= 4%/8%

= 0.5

If the PED is greater than 1, the demand is price elastic

If the PED is less than 1 , demand is price inelastic

For Dan, the demand is price inelastic

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3 years ago

Why do todayĂ˘s internet web applications and smartphone apps need databases?

siniylev [52]

They need databases so that they can have better access to information with the use of the internet. It also allows users to create backups with the help of cloud storage apps like cloud software. Aside from that, it makes it easier for users to update files, software and operating systems with the help of databases.

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3 years ago

When a company has a current obligation to make a future payment to their supplier due to a shipment of supplies that were recei

Vlad1618 [11]

Answer:

Liability

Explanation:

Assets are resources controlled by an entity as a result of a past event, for which future economic benefits flow to the entity.

Liabilities on the other hand are current obligations of an entity as a result of a past event for which future economic benefits are expected to flow our of the entity.

Therefore, when a company has a current obligation to make a future payment to their supplier due to a shipment of supplies that were received last week, the company would record this transaction with an increase to an asset account ( inventory or fixed asset for the item received) and a liability account due to the obligation to make future payments.

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4 years ago