Answer (D) is correct . A parent-subsidiary relationship arises from an effective investment in the stock of another enterprise in excess of 50%. The financial statements for the two companies ordinarily should be presented on a consolidated basis. To the extent the corporation is not wholly owned, a minority interest is presented.
Answer (A) is incorrect because A tax-free reorganization may or may not be a combination, and it may or may not result in a parent-subsidiary relationship.
Answer (B) is incorrect because Vertical combinations may also be accomplished by a merger or a consolidation, in which case the combining companies become one. A vertical combination combines a supplier or a customer firm with the acquiring company.
Answer (C) is incorrect because Horizontal combinations may also be accomplished by a merger or a consolidation, in which case the combining companies become one. A horizontal combination combines two firms in the same line of business.
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