Before the accounts of the parent and subsidiary can be added together to give the total net assets under the control of the economic entity,it is necessary to eliminate:
A)the parent's "Investment in subsidiary" asset account
B)the subsidiary's "Investment in parent" asset account
C)the equity in the subsidiary which the investment represents
D)both A and C

Question

Quizplus · Accepted Answer

The elimination process involves removing the effects of the parent's investment in the subsidiary and the equity in the subsidiary which the investment represents. Specifically, the parent's "Investment in subsidiary" asset account is eliminated to remove the duplicate reporting of the subsidiary's net assets, and the equity in the subsidiary is eliminated to remove the impact of intercompany transactions and ensure that the consolidated financial statements only reflect transactions with external parties. Therefore, both A and C need to be eliminated in the consolidation process.

Before the Accounts of the Parent and Subsidiary Can Be