When a company applies the partial equity method in accounting for its investment in a subsidiary and the subsidiary's equipment has a fair value greater than its book value, what consolidation worksheet entry is made in a year subsequent to the initial acquisition of the subsidiary?
A) A above
B) B above
C) C above
D) D above
E) E above

Question

When a company applies the partial equity method in accounting for its investment in a subsidiary and the subsidiary's equipment has a fair value greater than its book value, what consolidation worksheet entry is made in a year subsequent to the initial acquisition of the subsidiary? 
A) A above 
B) B above 
C) C above 
D) D above 
E) E above

Quizplus · Accepted Answer

When a subsidiary's equipment has a fair value greater than its book value, it indicates that the subsidiary's net assets have increased since the acquisition. Therefore, the consolidation worksheet entry would involve increasing the investment account for the partial equity method by the difference between the fair value and book value of the equipment, and increasing the non-controlling interest account by its proportionate share of the increase in net assets. Choice A involves increasing the investment account while recognizing the non-controlling interest's share of the increase in net assets.

When a Company Applies the Partial Equity Method in Accounting