bus 2 - the equity method, just the Inves tment in the...

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Question Several years ago, Bannett, Inc., bought a portion of the outstanding bonds of Smith Corporation, a subsidiary organization. The acquisition was made from an outside party. In the current year, how these intra-entity bonds should be accounted for within the consolidation process Answer Equity method & the consolidation may not create the various reported incomes for a parent company. But as per the equity method, rather than of adding a revenues & expenses of a subsidiary to a parent company, the single equity income figure has been included. Additionally, individual assets & the liabilities of a subsidiary have also been ignored in reporting a parent company 's financial position. As per
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Unformatted text preview: the equity method, just the Inves tment in the Subsidi ary assets account has been shown. Very frequently, an opportunity for omitting a subsidiary's liabil ities from a parent's balance sheet has been the stronger incentive for such approach , the tactic usually referred to as the off-balance sheet financing. T he wisdom of the consolidation has tended towards the centre on exclusion of the subsidiaries where more than fifty percent of the voting shares had been held. Now, reverse situation has been investigated. The Bannett, Inc., has bought the portion of an outstanding bonds of the Smith Corporation, the subsidiary organization. So the acquisition has been made from the outside party....
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This note was uploaded on 02/21/2012 for the course ACT 492 taught by Professor Ngo during the Fall '11 term at Colorado.

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