Reference no: EM132690923

Problem 1: Each of the following could constitute an eliminating entry, except:

a.debit Bonds Payable, credit Investment in Bonds.

b.debit Interest Receivable, credit Interest Payable.

c.debit Advances from Parent, credit Advances to Subsidiary.

d.debit Notes Payable, credit Notes Receivable.

Problem 2: With an 80-percent owned subsidiary, the noncontrolling interest (dollar amount) would be obtained by multiplying the parent company's stockholders' equity by 20%.

True

False

Problem 3: Under what circumstance would a business normally be required to report its investment in another company based upon the equity method?

a.When there is less than 20 percent ownership.

b.Under no circumstance.

c.When there is significant influence, but not control.

d.When there is majority ownership, but lack of control.

Problem 4: Eliminating entries are made on the:

a.books of the parent company only.

b.books of the subsidiary company only.

c.books of both the parent company and its subsidiary.

d.consolidating workpaper only.