CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

If Investor company, by issuing new stocks, acquires a 30% interest in Investee company at book value, under the proportionate consolidation method, Investor Company will report total assets of

A. $20,500.
B. $19,000.
C. $24,000.
Correct Answer: A

Under the proportionate consolidation method, the percentage owned of the investee company assets and liabilities are added to the investor company's balance sheet. In this case, total assets will be $19,000 + 30% * $5,000 = $20,500.

User Contributed Comments 7

User Comment
robbe1 If the stake is bought with cash, total assets stays at $19k.
turtle exactly :-)
raner why? will the CA(Cur Asset) account be reduced by the cash paid out?
katybo I think so
ilzina if investor company obtains additional funds by issuing new shares, the assets of investor go up by 1k. so 20k -1k (payment) + 30% x5k = 20.5k
kodali Good Comment Robbie
davidt876 no don't encourage him! he's wrong!
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