Pocket Corporation acquired 100 percent of the voting shares of Sleeve Inc. by issuing 10,000 new shares of $5 par value common stock with a $30 market value.Required:1. Which company is the parent and which is the subsidiary?2. Define a subsidiary corporation.3. Define a parent corporation.4. Which entity prepares the consolidated worksheet?5. Why are consolidation entries used?
What will be an ideal response?
1. Pocket is the parent and Sleeve is the subsidiary.
2. A subsidiary is an entity in which another entity, the parent company, holds a controlling financial interest.
3. A parent company holds a controlling financial interest in another company.
4. The parent, Pocket, prepares the consolidated worksheet.
5. Consolidation entries are used to adjust the amounts reported by the parent and all of the subsidiaries to reflect the amounts that would be reported if the separate legal entities were a single company.
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