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Assume that a parent company purchased less than 100% of the voting common stock when it...

Assume that a parent company purchased less than 100% of the voting common stock when it acquired a controlling interest in a subsidiary on August 15, 2019. The parent uses the equity method to account for the subsidiary on its pre-consolidation books. Both companies have a December 31, 2019 fiscal year end. Which of the following statements is correct?

A.In the balance sheet prepared immediately after the acquisition, the parent company's pre-consolidation retained earnings will always equal consolidated retained earnings.

B.Noncontrolling interest reported in the consolidated balance sheet always equals the percentage of shares held by the noncontrolling shareholders multiplied times the pre-acquisition reported net assets of the subsidiary.

C.Consolidated net income for the year ended December 31, 2019 will include 100% of the subsidiary's income for the entire year.

D.The amount of total assets reported in the consolidated balance sheet is usually less than total assets in the parents company's pre-consolidation balance sheet.

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Answer #1

Answer : Option A , In the balance sheet prepared immediately after the acqustition the parent companys Pre Consolidation retained earnings will always equal consolidated retained earnings.

Explanation;

Here the parent company purchased less than 100% of the voting common stock. When it acquired a controlling interest in a subsidiary on august 15 2019 . The company uses equity method. In the balance sheet prepared immediately after the acquisition the parent companys Pre consolidation retained earnings will always equal consolidated retained earnings.

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