Which of the following is true regarding a subsidiary's disposal of differential-related assets? 1. Both the...
Which of the following is true regarding a subsidiary's disposal of differential-related assets?
| 1. |
Both the parent's equity-method income and consolidated net income are affected. |
|
| 2. |
In consolidation, the portion of the differential related to the asset sold is treated as an adjustment to consolidated income. |
|
| 3. |
On the parent company's books, the portion of the differential included in the subsidiary investment account that relates to the asset sold must be written off by the parent under the equity method as a reduction in both the income from the subsidiary and the investment account. |
|
| 4. | all of the above |
Homework Answers
When a subsidiary disposes of differential related asset both the parents equity method income and consolidated net income are affected also the unamortized portion of the differential related acid is treated as an adjustment to consolidated income.
The net effect in the books of parent company will be reduction in the income from subsidiary and the investment account.
All the given options are correct hence the correct answer is 4.
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