advacc2 - Theories 1 Which of the following adjustments do...

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Theories 1. Which of the following adjustments do not occur in the consolidating process? A. Elimination of parent’s retained earnings B. Elimination of intercompany dividends C. Allocation of difference between cost and book value D. Elimination of the investment account 2. The non-controlling interest in the subsidiary is reported as: 3. Statement I: Subsidiary is an entity that controls or is controlled by or is under the common control with another entity, either directly or indirectly through one or more intermediaries. Statement II: Control is defined as the ability of an entity to direct the policies and management that guide the ongoing activities of another entity so as to increase its benefits and limit its losses from that other entity’s activities. A. Only statement I is true B. Both statements are true C. Only statement II is true D. Both statements are false 4. Statement I: Cost method is used when the acquirer/investor owns 20% or more (less than 50%) of the voting power of the investee/ acquiree, thereby exercising significant influence Statement II: Cost method is used when the acquirer(Parent) owns directly or indirectly more than half of the voting power of an entity (Subsidiary), thereby exercising significant influence. A. Only statement I is false B. Both statements are false C. Only statement II is false D. Both statements are true 5. Which is least likely to describe the cost model of accounting for inter-corporate investments?
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of the realization of income in that the subsidiaries earnings are available to the parent until transferred as dividends 6. The second elimination entry or the elimination of the allocated excess is also identical to that which would have been made at the date of acquisition. a.) True b.) False 7. Which of the following statements is false regarding the differences between cost and equity methods?
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