Question

In preparing consolidated working papers, beginning retained earnings of the parent company will be adjusted in years subsequent to acquisition with an elimination entry whenever:

a. a noncontrolling interest exists.

b. it does not reflect the equity method.

c. the cost method has been used only.

d. the complete equity method is in use.

Answer 1

Answer:

b. it does not reflect the equity method.

Explanation:

If the beginning retained earnings do not match with the equity method we must adjusted. If we do not; then after including the other transactions which are based on equity method will lead to a mistaken ending retained earnings and thus; the consolidated balance sheet will not match Assets with liabilities plus stockolders equity.