When preparing consolidated financial statements,adjustments for pre-acquisition equity and inter-entity transactions are recorded:
A)in the accounting records of the parent entity
B)in the accounting records of the subsidiary
C)on a consolidation worksheet
D)in the accounting records of the reporting entity.

Question

Quizplus · Accepted Answer

Adjustments for pre-acquisition equity and inter-entity transactions are recorded on a consolidation worksheet when preparing consolidated financial statements. This worksheet eliminates any inter-company transactions between the parent and subsidiary and adjusts for any differences in accounting policies between the two entities. The adjustments are not recorded in the accounting records of either the parent or the subsidiary.

When Preparing Consolidated Financial Statements,adjustments for Pre-Acquisition Equity and Inter-Entity