Which of the following statements regarding pre-acquisition entries prepared after acquisition date is incorrect?
A) They are adjusted for transfers between post-acquisition equity accounts.
B) They include the pre-acquisition entry prepared at acquisition date adjusted for the effects of all the transfers between pre-acquisition equity accounts and changes in the investment account up to the beginning of the current period.
C) They reverse the transfers between pre-acquisition equity accounts and changes in the investment account that happen in the current period.
D) They are adjusted for the changes in the investment account recognised by the parent in the subsidiary.

Question

Quizplus · Accepted Answer

Pre-acquisition entries prepared after the acquisition date are adjusted for transfers between pre-acquisition equity accounts and changes in the investment account up to the beginning of the current period. They also reverse any transfers between pre-acquisition equity accounts and changes in the investment account that happen in the current period. They are also adjusted for the changes in the investment account recognized by the parent in the subsidiary. Therefore, statement A is incorrect as it mentions "transfers between post-acquisition equity accounts" which is not relevant to pre-acquisition entries prepared after the acquisition date.

Which of the Following Statements Regarding Pre-Acquisition Entries Prepared After