1 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Adv anced Accou nting, 11e (Beams/Anthony/Bettinghaus/Smith) Chapter 4 Consolidated Techniques and Procedures Multiple Choice Questions 1) Which of the following will be debited to the Investment account when the equity method is used? A) Investee net losses B) Investee net profits C) Investee declaration of dividends D) Depreciation of excess purchase cost attributable to investee equipment Answer: B Objective: LO1 Difficulty: Easy 2) A parent company uses the equity method to account for its wholly-owned subsidiary. Which of the following will be a correct procedure for the Investment account? A) A debit for a subsidiary loss and a credit for dividends received B) A credit for subsidiary income and a debit for dividends received C) A debit for subsidiary dividends received and a credit for a subsidiary loss D) A credit for a subsidiary loss and a credit for dividends received Answer: D Objective: LO1 Difficulty: Easy 3) A parent corporation owns 55% of the outstanding voting common stock of one domestic subsidiary. The parent has control over the subsidiary. Which of the following statements is correct? A) The parent corporation must prepare consolidated financial statements for the economic entity. B) The parent corporation must use the fair value method. C) The parent company may use the equity method but the subsidiary cannot be consolidated. D) The parent company can use the equity method or the fair value/cost method. Answer: A Objective: LO1 Difficulty: Easy 2 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Use the follow ing information to answ er question(s) below . On January 1, 2011, Punch C...
