EXERCISE E3-1 General questions 1. A 75 percent-owned subsidiary should not be consolidated when: als operations are dissimilar from those of the parent company b Control of the subsidiary does not lie with the parent company There is a dominant noncontrolling interest in the subsidiary Consolidation would not provide the most meaningful financial statements 2. An 80 percent-owned subsidiary that cannot be consolidated must be accounted for a Under the equity method Under the cost method C Under the equity method if the parent exercises significant influence d At market value if the subsidiary is in bankruptcy 3. Consolidated statements for Pop Corporation and its 60 percent-owned investee, Son Company, will not be pre under current GAAP if: a The fiscal periods of Pop and Son are more than three months apart b Pop is a major manufacturing company and Son is an insurance company C Son is a foreign company d Pop Corporation and Son Company form a joint venture 4. Pop Industries owns 7,000 shares of Son Corporation's outstanding common stock (a 70 percent interest). The remaining 3,000 outstanding common shares of Son are held by Ott Insurance Company. On Pop Industries' con solidated financial statements, Ott Insurance Company is considered: a An investee An associated company An affiliated company d A noncontrolling interest 5. On January 1, Pop Company purchased 75 percent of the outstanding shares of Son Company at a cost exceeding the book value and fair value of Son's net assets. Using the following notations, describe the amount at which tie plant assets will appear in a consolidated balance sheet of Pop Company and Subsidiary prepared immediately after acquisition: Poy = book value of Pop's plant assets P = fair value of Pop's plant assets Spy = book value of Son's plant assets S = fair value of Son's plant assets a Por + Sp (S - S b Po + 0.75(Sb) + 0.75(Siv - Sb) cPbv + 0.75(S) d Pbv + Sb + 0.75(Stv - Sb