When a parent sells its interest in a subsidiary,any profit or loss generated by the subsidiary:
A) is transferred to the parent's investment in subsidiary account, and used to calculate the amount of profit or loss on the sale of the shares.
B) is immediately transferred to the equity section of the consolidated accounts, and is then available from distribution to shareholders.
C) is set off against any remaining balance in the goodwill on acquisition account, with any remaining amount distributed as dividends to the new owners.
D) is to be recorded in the consolidated financial statements for the period of the year that the parent had control of the subsidiary.

Question

Quizplus · Accepted Answer

When a parent sells its interest in a subsidiary, any profit or loss generated by the subsidiary is to be recorded in the consolidated financial statements for the period of the year that the parent had control of the subsidiary. This means that the profit or loss will be reflected in the consolidated financial statements up until the date of the sale, but not after. The profit or loss is not transferred to the parent's investment in subsidiary account or the equity section of the consolidated accounts, nor is it set off against any remaining balance in the goodwill on acquisition account.

When a Parent Sells Its Interest in a Subsidiary,any Profit