1. Companies that invest in other companies often prefer using the equity method instead of consolidating their...

Question:

1. Companies that invest in other companies often prefer using the equity method instead of consolidating their investments, because consolidating would
a. reduce their stockholders' equity.
b. reduce their reported net income and earnings per share.
c. reduce their assets.
d. increase their leverage (debt to assets ratio).
2. A U.S. company consolidates a VIE with which it has a contractual relationship, but no equity investment. If the company and the entity were not previously under common control, at the date the company identifies the entity as a VIE that meets the requirements for consolidation, the U.S. company's consolidated will report a noncontrolling interest valued at
a. the VIE's book value.
b. the VIE's fair value.
c. zero.
d. the fair value of the VIE's assets.
3. The consolidation working paper at the date of acquisition takes the book value balances of a parent and subsidiary and
a. Eliminates the parent's equity accounts and revalues the parent's assets and liabilities to fair value.
b. Eliminates the subsidiary's equity accounts and revalues the subsidiary's assets and liabilities to fair value.
c. eliminates the parent's equity accounts and revalues the subsidiary's assets and liabilities to fair value.
d. Eliminates the subsidiary's equity accounts and revalues the parent's assets and liabilities to fair value.
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...