Consolidated statements are proper for Neely, Inc., Randle, Inc., and Walker, Inc., if
A) Neely owns 80 percent of the outstanding common stock of Randle and 40 percent of Walker; Randle owns 30 percent of Walker.
B) Neely owns 100 percent of the outstanding common stock of Randle and 90 percent of Walker; Neely bought the stock of Walker one month before the balance sheet date and sold it seven weeks later.
C) Neely owns 100 percent of the outstanding common stock of Randle and Walker; Walker is in legal reorganization.
D) Neely owns 80 percent of the outstanding common stock of Randle and 40 percent of Walker; Reeves, Inc., owns 55 percent of Walker.

Question

Quizplus · Accepted Answer

A consolidated statement is proper when one company has control over another company, which is defined as owning more than 50% of the outstanding common stock. In option A, Neely owns 80% of Randle and 40% of Walker, which gives them control over both companies. Randle's ownership of 30% of Walker does not change Neely's control over both companies. Option B is not appropriate because Neely did not own Walker for a significant period of time before the balance sheet date. Option C is not appropriate because Walker is in legal reorganization. Option D is not appropriate because Reeves, Inc. also has significant ownership in Walker, which would not give Neely full control over the company.

Consolidated Statements Are Proper for Neely, Inc