On January 1,Year 1,P Company purchased all of the outstanding common shares of S Company.What kind of adjustment is required for the consolidation of the two balance sheets?

Question

Quizplus · Accepted Answer

When consolidating the balance sheets of a parent company and its subsidiary, the parent company's "Investment in S Company" account is eliminated through a credit adjustment. This is because the investment account on the parent's balance sheet is offset against the equity of the subsidiary to reflect the consolidated entity's net assets accurately.

On January 1,Year 1,P Company Purchased All of the Outstanding