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4. All of the following are acceptable methods to account for a majority-owned investment in a subsidiary except

a. the initial value method.

b. the partial equity method.

c. the equity method.

d. the fair value method.

e. the book value method.

5. All of the following statements regarding the sale of subsidiary shares are true except which of the following?

a The use of specific identification based on serial number is acceptable.

b The use of the FIFO assumption is acceptable.

c The use of the specific LIFO assumption is acceptable.

d The use of the averaging assumption is acceptable.

e The parent company must determine whether consolidation is still appropriate for the remaining shares owned.

6 Farly Company acquired 90% of Louden Company on January 1, 20X3, for $234,000 cash. Louden's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Louden's net assets revealed the following. Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.

	Book Value	Fair Value
Buildings (10-year life)	$10,000	$8,000
Equipment (4-year life)	$14,000	$18,000
Land	$5,000	$12,000

In consolidation at January 1, 20X3, what adjustment is necessary for Louden's buildings account?

a $2,000 increase

b $2,000 decrease

c $1,800 increase

d $1,800 decrease

e No change

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