Assuming no intercompany transactions,what effect would the elimination of the parent's ownership interest in the shareholder equity of the subsidiary against the investment in the subsidiary have on the preparation have on the preparation of financial statements?

Question

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Elimination of the parent's ownership interest in the shareholder equity of the subsidiary against the investment in the subsidiary is required for the preparation of consolidated financial statements. The difference arising from the elimination entry would yield the unamortized purchase price discrepancy on that date. This purchase price discrepancy arises when the cost of the investment in the subsidiary exceeds the book value of the net assets acquired. This difference is amortized over time and the unamortized balance is reflected in the consolidated financial statements via this elimination entry.

Assuming No Intercompany Transactions,what Effect Would the Elimination of the Parent's