In which of the following cases is it necessary to prepare consolidated financial statements?

Question

Quizplus · Accepted Answer

It is necessary to prepare consolidated financial statements when the investor buys 100% of the shares of Investee for cash. In this case, the investor has control over the Investee and must present financial statements that reflect the results of both companies as if they were one entity. In options A and C, the investor does not have control over the Investee and therefore does not need to prepare consolidated financial statements. Option D is not the best choice because even though the investor has obtained a 40% ownership in the Investee, it does not necessarily mean that they have control over it.

In Which of the Following Cases Is It Necessary to Prepare