1. Multiple Choice: What is the primary purpose of consolidated financial statements? a) To report the financial position of the parent company alone. b) To report the financial position as if the parent and subsidiaries are a single entity. c) To report the separate financial positions of the parent company and its subsidiaries. d) None of the above. Answer: b) To report the financial position as if the parent and subsidiaries are a single entity. Rationale: Consolidated financial statements are intended to present the financial position and results of operations for a parent and its subsidiaries as if the group were a single entity with one or more branches. 2. Fill-in-the-Blank: The equity method of accounting for investments is used when the investor has ________ influence over the investee. Answer: Significant Rationale: The equity