A year-end elimination entry is required to remove the subsidiary company's equity from the books of the parent company.

Question

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When a subsidiary company is fully consolidated into the parent company's financial statements, a year-end elimination entry is required to remove the subsidiary company's equity from the books of the parent company. This is because the parent company already owns 100% of the subsidiary's equity, so including it in the parent company's equity would result in double counting.

A Year-End Elimination Entry Is Required to Remove the Subsidiary