Asked by Nazwa Al-Sayeed on Jul 12, 2024
Verified
If one company owns more than 50% of the common stock of another company
A) a partnership exists
B) a parent-subsidiary relationship exists
C) the company whose stock is owned must be liquidated
D) the fair value method should be used to account for the investment
Parent-Subsidiary Relationship
A corporate structure dynamics where one company (the parent) controls another company (the subsidiary) through ownership of a majority of its voting stock.
Common Stock
Equity ownership in a corporation, with holders having a vote in company matters but typically last in line for claims on assets.
- Become familiar with the ideas pertaining to parent and subsidiary organizations.
- Understand the effect of ownership proportions on the application of accounting procedures.
Verified Answer
JD
Jefferson De GuzmanJul 17, 2024
Final Answer :
B
Explanation :
When one company owns more than 50% of the common stock of another company, a parent-subsidiary relationship exists. This means the parent company has control over the subsidiary, and consolidating financial statements is required.
Learning Objectives
- Become familiar with the ideas pertaining to parent and subsidiary organizations.
- Understand the effect of ownership proportions on the application of accounting procedures.
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