When a parent uses the partial equity method throughout the year to account for

Question

When a parent uses the partial equity method throughout the year to account for its investment in an acquired subsidiary, which of the following statements is false before making adjustments on the consolidated worksheet?

a? Goodwill will be recognized if acquisition value exceeds fair value of net assets acquired.

b? Parent company net income will be less than controlling interest in consolidated net income when fair value of net assets acquired exceeds book value of net assets acquired.

c? Subsidiary net assets are valued at their book values before consolidating entries are made.

d? Parent company net income will exceed controlling interest in consolidated net income when fair value of depreciable assets acquired exceeds book value of depreciable assets.

e? Parent company net income will equal controlling interest in consolidated net income when initial value, book value, and fair value of the investment are equal.

Explanation / Answer

Parent company net income will be less than controlling interest in consolidated net income when fair value of net assets acquired exceeds book value of net assets acquired. Option B should be selected

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