A majority-owned subsidiary that is in legal reorganization should normally be accounted for using:
A) consolidated financial statements.
B) the equity method.
C) the market value method.
D) the cost method.

Question

Quizplus · Accepted Answer

A majority-owned subsidiary that is in legal reorganization should normally be accounted for using the cost method. This is because the cost method is the most conservative method of accounting for a subsidiary in legal reorganization, and it ensures that the parent company does not recognize any income or loss from the subsidiary until the reorganization is complete.

A Majority-Owned Subsidiary That Is in Legal Reorganization Should Normally