The pre-acquisition entries are used to:

A) eliminate the investment in the subsidiary and the pre-acquisition equity of the subsidiary.
B) eliminate the investment in the subsidiary and the post-acquisition equity of the subsidiary.
C) eliminate the pre-acquisition equity of the subsidiary.
D) eliminate the post-acquisition equity of the subsidiary.

Question

Jonah Rosenblum · Accepted Answer

Final Answer : A, Explanation :  The pre-acquisition entries are used to eliminate the investment in the subsidiary and the pre-acquisition equity of the subsidiary in the consolidated financial statements. This is necessary because the consolidated financial statements should only reflect the assets and liabilities of the parent company and its subsidiaries after the acquisition date. By eliminating the pre-acquisition equity of the subsidiary, the parent company is only reflecting its ownership interest in the subsidiary after the acquisition date.

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