On the date of acquisition, consolidated retained earnings and consolidated ordinary shares in shareholders' equity is equal to:
A) the sum of the parent and subsidiary's shareholders' equity.
B) the sum of the parent's shareholders' equity plus its pro rata share of the subsidiary's shareholders' equity.
C) the parent's shareholders' equity.
D) the subsidiary's shareholders' equity.

Question

Quizplus · Accepted Answer

On the date of acquisition, consolidated retained earnings and consolidated ordinary shares in shareholders' equity reflect only the parent's shareholders' equity. The consolidation process involves combining the financial statements of the parent and its subsidiaries, but the consolidated shareholders' equity initially includes only the parent's figures, not the subsidiary's, because the investment in the subsidiary is replaced with the subsidiary's assets and liabilities.

On the Date of Acquisition, Consolidated Retained Earnings and Consolidated