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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Why is it necessary to eliminate transactions between the parent and subsidiary' in consolidation?

To determine

Concept introduction:

Held to maturity: The Held to maturity is a type of investment which an investor intends to hold until maturity. These securities are recorded at amortized cost.

Trading: Trading securities are purchased by the investor for the purpose to sell within a short-term period to each profit. These securities are recorded at their fair value and any gain or loss is recognized in the income statement for that period.

Available for sale: All the other securities are considered as available for sale and these securities are recorded at their fair value and any gain or loss is recognized unrealized gain or loss until the securities are actually sold.

To discuss:

The reason for elimination of transactions between the parent and subsidiary in consolidation.

Explanation

The consolidated balance sheet is mergers of the parent company balance sheet and subsidiary company balance sheet. The parent company balance sheet is a st...

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