A Co. has acquired an 80% controlling interest in B Co. If using the proportionate consolidation method, the consolidated balance sheet on the date of acquisition, will contain:
A) the parent's pro rata share of the assets and liabilities of the subsidiary at book value.
B) 100% of the assets and liabilities of the subsidiary at fair market value.
C) 100% of the assets and liabilities of the subsidiary at book value.
D) the parent's pro rata share of the assets and liabilities of the subsidiary at fair market value.

Question

Quizplus · Accepted Answer

The proportionate consolidation method involves including the parent's pro rata share (in this case, 80%) of the assets and liabilities of the subsidiary in the consolidated balance sheet. This is done at fair market value to reflect the true economic value of these assets and liabilities at the time of acquisition.

A Co Has Acquired an 80% Controlling Interest in B Co