Question 21 (1 point)

On whose books are the consolidating adjusting entries recorded?

Question 21 options:

	In the general journal of both the parent and subsidiary companies
	Only on the consolidated worksheet
	In the general journal of the parent company and on the consolidated worksheet
	In the general journal of both the parent and subsidiary companies and on the consolidated worksheet

Question 22 (1 point)

Townsend Ltd. has the following shareholders:

Palermo Co.60% Nix Ltd.30% Riley Ltd.10%

Nix does not conduct any business with Townsend; nor has it been able to secure a seat on the board of directors. Which of the following statements is true?

Question 22 options:

	Nix should consider Townsend to be a special purpose entity.
	Nix should treat Townsend as a non-strategic investment.
	Nix should consider Townsend to be an associated company.
	Nix has significant influence over Townsend.

Question 23 (1 point)

Diaz Ltd. acquired 35% of Saturn Ltd. many years ago. At first, Saturn was profitable, but recently, it has been posting losses. Diaz believes that Saturn will be profitable again and has no plans to dispose of it, even though Diaz's share of the losses has exceeded its investment interest. Diaz uses the equity method. Which of the following statements is true?

Question 23 options:

	Diaz should stop recognizing its share of Saturn's losses and not recognize Saturn's future profits until they exceed the unrecognized losses.
	Diaz should continue to decrease its "Investment in Saturn" account.
	Diaz should reduce its retained earnings directly by its share of Saturn's losses.
	Diaz should put its share of Saturn's losses in a contra-account to its "Investment in Saturn" account, to be reduced by Saturn's future profits.

Question 24 (1 point)

Which methods will result in the same income and shareholders' equity?

Question 24 options:

	Equity and consolidation
	Cost and equity
	Cost and consolidation
	Each method results in different income and shareholders' equity amounts.

Question 25 (1 point)

Bud Ltd. owns 100% of Calla Co. Calla owns 55% of Daisy Ltd., and Daisy owns 90% of Fern Ltd. Which of the following statements is true?

Question 25 options:

	Only Bud has to prepare consolidated financial statements.
	Only Bud and Calla have to prepare consolidated financial statements.
	Only Bud and Daisy have to prepare consolidated financial statements.
	Bud, Calla, Daisy, and Fern have to prepare non-consolidated financial statements.