When a parent-subsidiary relationship exists between two companies:
A) the parent company will keep one set of accounting records covering both companies
B) the subsidiary company will keep one set of accounting records covering both companies
C) the parent company must use the cost method to account for the subsidiary
D) both the parent and the subsidiary will continue to keep their own separate accounting records as if the parent-subsidiary relationship does not exist

Question

Quizplus · Accepted Answer

When a parent-subsidiary relationship exists between two companies, both the parent and subsidiary will continue to keep their own separate accounting records as if the parent-subsidiary relationship does not exist. However, the parent company may consolidate the subsidiary's financial statements with its own for reporting purposes.

When a Parent-Subsidiary Relationship Exists Between Two Companies