While preparing the consolidated balance sheet, which one of the following statements is correct concerning adjustments (if any) to retained earnings.

a. No adjustment is required under either the Cost or the Equity methods.

b. No adjustment is required if the parent has been using the Equity Method.

c. Under both the Cost and Equity methods, the parent must record its share of its Subsidiary's income.

d. Under both the Cost and Equity methods, the parent must record its share of its Subsidiary's income less any dividends received from the subsidiary.

You just purchased a controlling interest in another company. On the acquisition date, the common shares and retained earnings on the consolidated balance sheet would be:

a. the parent's shareholders' equity.

b. the total of the parent's shareholders' equity plus its share of the subsidiary's shareholders' equity.

c.the subsidiary's shareholders' equity.

d. the total of the parent and subsidiary's shareholders' equity.

Which statement best explains the impact of on consolidated income taxes from unrealized profits or losses from intercompany transactions?

a. They would be charged to retained earnings during the preparation of financial statements.

b. They would be recognized as assets for the purchasing entity and liabilities for the selling entity.

c.These taxes can be ignored since an increase in income tax expense for one company is offset by an equivalent reduction in income tax expense for the other.

d. The income tax will be expensed when the profit is realized in accordance with the matching principle.