Question

Corporation Parent (P)owns 85 percent of Corporation A1; Corporation A1 owns 60 percent of Corporation A2; Corporation A2 owns 90 percent of A3; Corporation A3 owns 60 percent of Corporation A4 and 15 percent of Corporation A2; Corporation A4 owns 100 percent of Corporation A5. Identify the consolidated group(s) of corporations.

a. P-­?A1-­?A2-­?A3-­?A4-­?A5

b. P-­?A1 only

c. P-­?A1and A2-­?A3-­?A4-­?A5

d. P-­?A1; A2-­?A3; and A4-­?A5

e. P-­?A1 and A2-­?A3

Answer 1

Group of Corporations include the parent company and its subsidiaries.

Subsidiary is a company in which parent company holds not less than 51% of common stock.

Subsidiary company of Subsidiary is also a subsidiary of holding(parent) Company.

In the instant case,

P owns 85% of A1. So A1 is a subsidiary to P.

A1 owns 60% of A2 and A2 owns 90% of A3. So A2 and A3 are subsidiaries to A1.

A3 owns 60% of A4 and A4 owns 100% of A5. So A4 and A5 are subsidiaries to A3.

This can be depicted as follows:

Parent (P)--------->A1----------->A2----------->A3----------->A4---------->A5.

In the above every company is a subsidiary to its preceeding Company.

So P, A1, A2, A3, A4, A5 form part of Consolidated group of Corporations.

Therefore the answer is Option A.