Company Pea owns 90 percent of Company Essone which in turn owns 80 percent of Company Esstwo.Company Esstwo owns 100 percent of Company Essthree.Consolidated financial statements should be prepared to report the financial status and results of operations for:
A)Pea.
B)Pea plus Essone.
C)Pea plus Essone plus Esstwo.
D)Pea plus Essone plus Esstwo plus Essthree.

Question

Quizplus · Accepted Answer

In order to consolidate the financial statements, all the subsidiaries need to be included. Since Pea owns 90% of Essone and Essone owns 80% of Esstwo and Esstwo owns 100% of Essthree, it is necessary to consolidate all four companies (Pea, Essone, Esstwo, and Essthree) in the combined financial statements. Therefore, the correct choice is Pea plus Essone plus Esstwo plus Essthree.

Company Pea Owns 90 Percent of Company Essone Which in Turn