Ochoa Co.records its investment in its subsidiary using the equity method.What is the first step that Ochoa should make in preparing the consolidated financial statements?
A)Make the acquisition adjustments
B)Make the cumulative operations adjustments
C)Make the current operations adjustments
D)Reverse the effects of equity-based adjustments

Question

Quizplus · Accepted Answer

The first step in preparing consolidated financial statements when using the equity method is to reverse the effects of equity-based adjustments to eliminate the equity method entries and prepare for consolidation.

Ochoa CoRecords Its Investment in Its Subsidiary Using the Equity Method