Parentsubsidiary relationship LO2 In the following independent situations, determine whether a parentsubsidiary relationship exists
Question:
Parent–subsidiary relationship LO2 In the following independent situations, determine whether a parent–subsidiary relationship exists and which entity, if any, is a parent. 1. Tom Ltd and Toots Ltd each hold 50% of the shares in Jerry Ltd, all companies being involved in the computer software industry. Tom Ltd agrees that Toots Ltd should provide the management of Jerry Ltd because of the expertise provided by its managing director, Bob Gates. Toots Ltd receives a management fee for providing its expertise. 2. Spike Ltd has recently acquired a 35% interest in Tyke Ltd, a company that has discovered large deposits of iron ore. Spike Ltd has extensive experience in the mining industry and, as a result, has been able to have four of its directors elected to the board of Tyke Ltd, which has six directors in total. 3. Butch Ltd holds 30% of the shares issued by Toodles Ltd. The other shareholders come from mixed backgrounds, but each holds on average 10% of shares in Toodles Ltd. Only three of the other shareholders have an interest in the management of the company. There are seven directors of Toodles Ltd. Four of these are appointed by Butch Ltd. The other three directors are appointed by the three other shareholders who have an interest in the management of the company. Most of the remaining shareholders live outside Australia and rarely attend annual general meetings of Toodles Ltd unless they have other business to attend to in the country around the same time as the annual general meetings are held.
Step by Step Answer:
Financial Reporting
ISBN: 978-0730363361
2nd Edition
Authors: Janice Loftus ,Ken Leo ,Sorin Daniliuc ,Belinda Luke ,Hong Nee Ang ,Karyn Byrnes