LO 5

Question 1

3 types of contra accounts

Answer 1

allowance for bad debts
accumulated depreciation
allowance for obsolete inventory

Question 2

allowance for bad debts

Answer 2

a contra account used to offset the assets in the accounts receivable

Question 3

the decision on whether to file consolidated financials vs. multiple individual financials is

Answer 3

made every year depending on tax consequences and investor demands

Question 4

if a company owns more than 50% of another company,

Answer 4

the second company is considered a subsidiary and can consolidate the financials for the two companies

Question 5

group accounting follows the philosophy of

Answer 5

substance over form

Question 6

substance over form philosophy

Answer 6

financials are presented in a way that emphasizes the economic substance of transactions and events, making it easier for stakeholders to absorb

Question 7

in group accounting, any transactions between the parent company and its subsidiaries are

Answer 7

eliminated upon consolidation