When consolidating a subsidiary that was acquired on a date other than the first day of the fiscal year, which of the following statements is true of the subsidiary with respect to the presentation of consolidated financial statement information?
A) Pre-acquisition earnings are deducted from consolidated revenues and expenses.
B) Pre-acquisition earnings are added to consolidated revenues and expenses.
C) Pre-acquisition earnings are deducted from the beginning consolidated stockholders' equity.
D) Pre-acquisition earnings are added to the beginning consolidated stockholders' equity.
E) Pre-acquisition earnings are ignored in the consolidated income statement.

Question

Quizplus · Accepted Answer

Pre-acquisition earnings are ignored in the consolidated income statement because they relate to the period before the parent company gained control of the subsidiary. Only post-acquisition earnings are included in the consolidated financial statements.

When Consolidating a Subsidiary That Was Acquired on a Date