Penn Inc., a manufacturing company, owns 75 percent of the common stock of Sell Inc., an investment company. Sell owns 60 percent of the common stock of Vane Inc., an insurance company. In Penn's consolidated financial statements, should Sell and Vane be consolidated or reported as equity method investments (assuming there are no side agreements)

Question

Ibrahim Saunders

Business

11 May, 11:30

Penn Inc., a manufacturing company, owns 75 percent of the common stock of Sell Inc., an investment company. Sell owns 60 percent of the common stock of Vane Inc., an insurance company. In Penn's consolidated financial statements, should Sell and Vane be consolidated or reported as equity method investments (assuming there are no side agreements)

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Answers (1)

Know the Answer?

Emmy Stark · Answer 1

correct answer is Consolidation used for both Sell and Vane.

Explanation:

given data

common stock Penn Inc = 75 percent

common stock Vane Inc = 60 percent

solution

Parent company control both the company so as per to International Financial Reporting Standard directly controls the parent company is (75% ownership and 75% control) or indirectly.

so 75% * 60% = 45%

Consolidate the ownership and control of 60% of the company.

so the Affiliate Cell controls both the Incorporation so they must be consolidated for group accounts.

so correct answer is Consolidation used for both Sell and Vane.