Consolidation Rules 1 A parent normally consolidates a created subsidiary that

a. Is a captive finance subsidiary created to furnish financing to the parent’s retail customers.

b. Is expected to be sold in the very near future.

c. Is in an entirely different line of business.

d. Is located in a developing country.

e. Is described by items a through d.

2 Which of the following is an acceptable reason for excluding a subsidiary from consolidation?

a. The subsidiary’s assets equal its liabilities.

b. Currency transfer restrictions prevent the subsidiary from paying dividends.

c. The subsidiary has substantial intercompany inventory sales to its parent.

d. The parent presents the subsidiary’s separate financial statements in the parent’s annual re¬

port.