If a parent company owns 90% of a subsidiary's outstanding shares, the parent should generally account for the subsidiary's income under the
A) cost/amortized cost model.
B) fair value through net income model.
C) fair value through other comprehensive model.
D) consolidation method.

Question

Quizplus · Accepted Answer

The consolidation method should be used when a parent company owns more than 50% of a subsidiary's outstanding shares. Under this method, the parent company combines its financial statements with the subsidiary's financial statements, as if they were one entity. This provides a more accurate reflection of the overall financial position and performance of the combined entity. Therefore, the consolidation method is the most appropriate choice for this scenario.

If a Parent Company Owns 90% of a Subsidiary's Outstanding