The Brookhaven Company is the parent company of two subsidiaries: an HMO and an insurance company. The headings on Brookhaven's financial statements read "Consolidated Financial Statements of Brookhaven Company." From the following answer choices, select the response that correctly indicates, under the entity concept, whether the HMO and the insurance company are accounted for as separate entities and whether the subsidiaries' financial results would be included in Brookhaven's consolidated financial statements.

Question

Quizplus · Accepted Answer

Under the entity concept, each subsidiary is considered a separate legal entity and their financial results should be included in Brookhaven's consolidated financial statements. Therefore, the first part of option A is correct (accounted for as separate entities), and the second part is also correct (results included in Brookhaven's statements).

The Brookhaven Company Is the Parent Company of Two Subsidiaries