When a subsidiary purchases shares of the parent, on a consolidated basis:
A)a determination and distribution schedule must be completed to determine if goodwill is present.
B)it is considered to be the parent's purchase of treasury stock.
C)an elimination entry must be made for the subsidiary's share of the parent's income.
D)None of the above is correct.

Question

When a subsidiary purchases shares of the parent, on a consolidated basis:
A)​a determination and distribution schedule must be completed to determine if goodwill is present.
B)​it is considered to be the parent's purchase of treasury stock.
C)​an elimination entry must be made for the subsidiary's share of the parent's income.
D)​None of the above is correct.

Quizplus · Accepted Answer

When a subsidiary purchases shares of the parent, it is considered to be the parent's purchase of treasury stock. This means that the subsidiary's investment in the parent is eliminated on a consolidated basis, and the parent's equity account for treasury stock is increased by the amount paid by the subsidiary for the shares. There is no need to determine goodwill or make elimination entries for the subsidiary's share of the parent's income in this scenario.

When a Subsidiary Purchases Shares of the Parent, on a Consolidated