Multiple Choice: Financial Reporting Select the correct answer for each of the following:

1. Which of the following are not reported in consolidated financial statements?

a. Intercompany receivables and payables.

b. The parent’s investment in the subsidiary.

c. The subsidiary’s stockholders’ equity accounts.

d. All of the above are excluded.

2. Which of the following statements is correct?

a. When consolidated financial statements are prepared, total liabilities will always equal the sum of the liabilities reported by the individual companies.

b. The stockholders of a parent company are considered to be the primary owners of the consolidated entity.

c. The claims of the minority or noncontrolling shareholders are eliminated when preparing consolidated financial statements and are not reported.

d. All of the above.

3. When segment reports are presented:

a. Operating income and segment assets must be reported for each segment.

b. All costs of operating the company are assigned to the individual segments so that net income can be calculated accurately for each segment.

c. Customers are given an opportunity to determine the cost of the products they are purchasing.

d. Consolidated statements need not be prepared.

4. Interim financial statements:

a. Are presented when a company has one or more major customers purchasing a significant part of the company’s total output.

b. Typically present only balance sheet information.

c. Are necessary to provide greater detail when consolidated financial statements are prepared.

d. Help build a picture of the annual reporting period.