CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Lewis Corporation has owned 75% of the common stock of Clark Corporation throughout the year. What is the proper balance sheet presentation for Lewis' investment at year-end?

A. The investment account will be presented in the noncurrent asset section of the balance sheet as available-for-sale securities.
B. The investment account will be presented in the noncurrent asset section of the balance sheet according to the equity method.
C. The investment account will be eliminated, and consolidated financial statements will be presented.
Correct Answer: C

Majority ownership situations requiring consolidation occur when a shareholder owns more than 50% of the stock of the corporation.

User Contributed Comments 2

User Comment
vi2009 acquisition method ... consolidation of accounts.
Equity method for minority active investment = 1 liner for B/S and I/S
davidt876 proportional consolidation for significant influence (20-50%) = % of BV of assets, liabilities and equity added to investor's balance sheet.

but remember both the investee's retained earnings and commons stock get rolled together, and a % of that figure is added to the common stock of the investor (no change to investor's retained earnings)
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