Consolidated statements for X, Y, and Z are proper if
A)X owns 100% of the outstanding common stock of Y and 49% of Z; M owns 51% of Z.
B)X owns 100% of the outstanding common stock of Y and 75% of Z; X bought the stock of Z one month before the statement date and sold it 6 weeks later.
C)X owns 100% of the outstanding stock of Y; Y owns 75% of Z.
D)There is no interrelation of financial control among X, Y, and Z; however, they are contemplating the joint purchase of 100% of the outstanding stock of D.

Question

Consolidated statements for X, Y, and Z are proper if
A)​X owns 100% of the outstanding common stock of Y and 49% of Z; M owns 51% of Z.
B)​X owns 100% of the outstanding common stock of Y and 75% of Z; X bought the stock of Z one month before the statement date and sold it 6 weeks later.
C)​X owns 100% of the outstanding stock of Y; Y owns 75% of Z.
D)​There is no interrelation of financial control among X, Y, and Z; however, they are contemplating the joint purchase of 100% of the outstanding stock of D.

Quizplus · Accepted Answer

Consolidated statements are appropriate when there is a parent-subsidiary relationship, where the parent company owns more than 50% of the subsidiary. In option C, X indirectly controls Z through Y, making it appropriate for consolidation.

Consolidated Statements for X, Y, and Z Are Proper If