The Pre-Acquisition Entry Is Necessary To

question 47

Multiple Choice

The pre-acquisition entry is necessary to:

• A) avoid overstating the equity and net assets of the group.
• B) avoid understating the equity and net assets of the group.
• C) avoid overstating the equity and net assets of the parent.
• D) record the 'shares in subsidiary' account in the parent's records.

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Definitions:

Owner's Equity

After settling all obligations, the balance of an entity's assets stands as a representation of the shareholder or owner's equity.

Additional Investments

Funds or assets that an investor or business owner contributes to a business beyond the initial investment, to support operations or expansion.

Net Loss

The amount by which total expenses exceed total revenues in a given period, indicating financial loss.

Accounts Payable

Liabilities to suppliers or creditors for goods, supplies, or services purchased on credit.