What is the effect if an unconsolidated subsidiary is accounted for by the equity method but consolidated statements are being prepared for the parent company and other subsidiaries?
A)All of the unconsolidated subsidiary's accounts will be included individually in the consolidated statements.
B)The consolidated retained earnings will not reflect the earnings of the unconsolidated subsidiary.
C)The consolidated retained earnings will be the same as if the subsidiary had been included in the consolidation.
D)Dividend revenue from the unconsolidated subsidiary will be reflected in consolidated net income.

Question

What is the effect if an unconsolidated subsidiary is accounted for by the equity method but consolidated statements are being prepared for the parent company and other subsidiaries?
A)​All of the unconsolidated subsidiary's accounts will be included individually in the consolidated statements.
B)​The consolidated retained earnings will not reflect the earnings of the unconsolidated subsidiary.
C)​The consolidated retained earnings will be the same as if the subsidiary had been included in the consolidation.
D)​Dividend revenue from the unconsolidated subsidiary will be reflected in consolidated net income.

Quizplus · Accepted Answer

The equity method already reflects the parent's share of the subsidiary's earnings in the parent's retained earnings, so consolidated retained earnings will be the same as if the subsidiary had been consolidated.

What Is the Effect If an Unconsolidated Subsidiary Is Accounted