The correct answer is B. Placo and Simco.
In order for an investment to be consolidated with the parent company in its consolidated financial statements, the parent company must have control over the investee. Control is typically determined by ownership of over 50% of the voting stock.
In this scenario, Aceco has 60% ownership of the voting stock of Placo and 100% ownership of the voting stock of Simco, making them both eligible for consolidation. However, Aceco only has 40% ownership of the voting stock of Kapco, so it does not have control over Kapco and therefore would not consolidate its financial statements.
Aceco has significant investments in three separate entities. These investments are:
1. 40% ownership of the voting stock of Kapco.
2. 60% ownership of the voting stock of Placo.
3. 100% ownership of the voting stock of Simco
Which of Aceco's investments would be consolidated with Aceco in its consolidated financial statements?
A. Simco only.
B. Placo and Simco.
C. Kapco, Placo, and Simco.
D. Kapco only.
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