Under the parent company method, which of the following statements pertaining to consolidated financial statements is TRUE?

Multiple Choice

The consolidated balance sheet is prepared by adding together the fair market values of both the parent and its subsidiary.

The consolidated balance sheet is prepared by adding the carrying amounts of both the parent and its subsidiary, as well as the parent's share of the fair value excess and goodwill.

The consolidated balance sheet is prepared by adding the fair market values of both the parent and its subsidiary as well as the parent's share of the fair value excess and goodwill.

The consolidated balance sheet is prepared by adding the carrying amounts of both the parent and its subsidiary.