At the date of acquisition by a parent company,the fair value of a subsidiary's fixed assets were larger than their book value.When preparing consolidated financial statements,the fixed assets of the subsidiary are ________ and depreciation expense is ________.
A)decreased to fair value; decreased
B)increased to fair value; increased
C)not adjusted; not adjusted
D)increased to fair value; not adjusted

Question

Quizplus · Accepted Answer

When preparing consolidated financial statements, the fixed assets of the subsidiary are increased to fair value to reflect the true economic value of the assets. The depreciation expense is also increased to reflect the higher value of the assets. Therefore, Option B is correct. Option A is incorrect because the fixed assets are increased, not decreased, to fair value. Option C is incorrect because adjustments are required to reflect the true economic value of the assets. Option D is incorrect because both the fixed assets and the depreciation expense are adjusted to fair value.

At the Date of Acquisition by a Parent Company,the Fair