Question 1

_____ A valid reason for not consolidating a subsidiary is

Accepted Answer

A subsidiary being effectively managed by a foreign government can be a valid reason for not consolidating it, as the parent company may not have control over its operations, which is a key criterion for consolidation.

Question 2

_____ A valid reason for not consolidating a subsidiary is

Accepted Answer

The reasons provided in options A, B, C, and D are not valid reasons for not consolidating a subsidiary according to accounting standards. Consolidation is generally required when the parent company has control over the subsidiary, regardless of these circumstances.

Question 3

_____ A parent could justifiably not consolidate a subsidiary that is:

Accepted Answer

The answer of _____ A parent could justifiably not consolidate...

Question 4

_____ Pixco (publicly owned) controls Sixco. Pixco could justifiably not consolidate Sixco if:

Accepted Answer

B) Sixco operates in a foreign country that has imposed severe long-term capital outflow restrictions. This situation can justify not consolidating Sixco because the restrictions could significantly impair Pixco's ability to control Sixco's operational and financial policies, making consolidation impractical or misleading.

Question 5

_____ A valid reason for not consolidating a subsidiary is

Accepted Answer

None of the options A, B, C, or D are valid reasons for not consolidating a subsidiary. Consolidation is generally required when a parent company has control over a subsidiary, regardless of these conditions.

Question 6

_____ A publicly owned company has only one subsidiary. Under regulatory rules, the subsidiary cannot pay dividends to the parent above a certain amount. Under the SEC's rules, this restriction must be disclosed

Accepted Answer

The correct answer is C because according to SEC rules, a restriction on the ability of a subsidiary to transfer funds to the parent company in the form of dividends must be disclosed if the subsidiary's restricted net assets exceed 25% of the total consolidated net assets. This is considered a significant restriction that could impact the parent company's liquidity and financial flexibility, hence the need for disclosure.

Question 7

_____ Parco, a publicly owned company, could properly not consolidate Sarco, which is controlled by means of

Accepted Answer

Severe and long-term currency transfer restrictions can prevent the ability to control financial policies and distributions, justifying non-consolidation despite majority interest.

Question 8

_____ Which of the following is not a required consolidation disclosure?

Accepted Answer

The answer of _____ Which of the following is not...

Question 9

_____ Paxco, a publicly owned company, controls Saxco (parent created). Consolidation of Saxco is not required if

Accepted Answer

The answer of _____ Paxco, a publicly owned company, controls...

Question 10

A branch that maintains a general ledger is said to use a(n) ____________________ ______________________ accounting system.

Accepted Answer

The answer of A branch that maintains a general ledger...

Question 11

The Investment in Branch accounting has a balance that equals the ____________ ______________________ account of the branch.

Accepted Answer

The answer of The Investment in Branch accounting has a...

Question 12

On the home office's books, the earnings of a branch are recorded in an account called ________________________________________.

Accepted Answer

The answer of On the home office's books, the earnings...

Question 13

Income taxes pertaining to branch earnings are usually recorded on the books of the ________________________________________.

Accepted Answer

The answer of Income taxes pertaining to branch earnings are...

Question 14

A transfer of inventory from a home office to a branch is called a(n)_____________ ___________________________ inventory transfer.

Accepted Answer

The answer of A transfer of inventory from a home...

Question 15

A major disadvantage of a centralized accounting system is that the profitability of branch operations cannot be determined because branch operations are not accounted for in a separate general ledger.

Accepted Answer

In a centralized accounting system, the financial transactions of branch operations can still be accounted for and analyzed separately within the overall system, allowing for the determination of each branch's profitability.

Question 16

Home office allocations to a branch are not required under U.S. GAAP.

Accepted Answer

Under U.S. GAAP, there is no specific requirement for allocating home office costs to branches; such allocations are a matter of company policy rather than a requirement of the accounting standards.

Question 17

Income taxes can be allocated to a branch.

Accepted Answer

Income taxes can be allocated to a branch if it operates in a jurisdiction with tax laws that require it to file tax returns and pay taxes on its income separately from the parent company.

Question 18

Branch fixed assets can be carried on the home office's books under a decentralized accounting system.

Accepted Answer

In a decentralized accounting system, branch fixed assets can indeed be carried on the home office's books, as this system allows for branches to maintain their own financial records while still integrating with the overall financial system of the parent company.

Question 19

If branch fixed assets are recorded on the home office's books, depreciation expense would not be charged to branch operations.

Accepted Answer

Depreciation expense for branch fixed assets recorded on the home office's books is still charged to branch operations, as it reflects the cost of using those assets in the branch's operations.

Question 20

_____ Which of the following accounts is a reciprocal account to the Investment in Branch account?

Accepted Answer

The answer of _____ Which of the following accounts is...

Quiz 1: Wholly Owned Subsidiaries: at Date of Creation

_____ A valid reason for not consolidating a subsidiary is

_____ A valid reason for not consolidating a subsidiary is

_____ A parent could justifiably not consolidate a subsidiary that is:

_____ Pixco (publicly owned) controls Sixco. Pixco could justifiably not consolidate Sixco if:

_____ A valid reason for not consolidating a subsidiary is

_____ A publicly owned company has only one subsidiary. Under regulatory rules, the subsidiary cannot pay dividends to the parent above a certain amount. Under the SEC's rules, this restriction must be disclosed

_____ Parco, a publicly owned company, could properly not consolidate Sarco, which is controlled by means of

_____ Which of the following is not a required consolidation disclosure?

_____ Paxco, a publicly owned company, controls Saxco (parent created) . Consolidation of Saxco is not required if

A branch that maintains a general ledger is said to use a(n) __ accounting system.

The Investment in Branch accounting has a balance that equals the __________ account of the branch.

On the home office's books, the earnings of a branch are recorded in an account called ________________________________________.

Income taxes pertaining to branch earnings are usually recorded on the books of the ________________________________________.

A transfer of inventory from a home office to a branch is called a(n)_ _______________ inventory transfer.

A major disadvantage of a centralized accounting system is that the profitability of branch operations cannot be determined because branch operations are not accounted for in a separate general ledger.

Home office allocations to a branch are not required under U.S. GAAP.

Income taxes can be allocated to a branch.

Branch fixed assets can be carried on the home office's books under a decentralized accounting system.

If branch fixed assets are recorded on the home office's books, depreciation expense would not be charged to branch operations.

_____ Which of the following accounts is a reciprocal account to the Investment in Branch account?