Soal Teori

1. Consolidated financial statements are not affected by the method used by the parent
company in accounting for its subsidiary investments. Such statements are the same
regardless of whether the parent company uses the cost method, the equity method, or
an incomplete equity method in accounting for its subsidiary investments. The working
paper adjustments will be different, however, depending on how the parent company
accounts for its subsidiary investments.
2. The standard method of accounting for equity investments of 20 percent or more is the
equity method. But if the parent company issues only consolidated financial statements
as the statements of the primary reporting entity, and the consolidated financial
statements are correct, it makes no difference how the records of the parent company
are maintained. The Financial Accounting Standards Board (and its predecessor
organization) established standards for external reporting but not for maintenance of
internal accounting records.
3. Under the equity method, a parent company amortizes patents from its subsidiary
investments by adjusting its subsidiary investment and subsidiary income accounts.
Since patents and patent amortization accounts are not recorded on the parent
company’s books, they are created for consolidated statement purposes through
working paper entries.
Soal Exercise
E4-1
1. D
2. A
3. A
4. D
5. B
6. D
7. B
8. B
9. A
10. B

Soal Problem
P4-7