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    Monica1966's Avatar
    Monica1966 Posts: 29, Reputation: 1
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    #1

    Jul 16, 2011, 07:39 AM
    Accounting
    Company A acquires Company B. The purchase method of accounting is appropriately used for the business combination. Whick of the following account(s) show(s) a zero balance when concolidated financial statements are prepared?

    A) Investment in B company
    B) Common Stock B Company
    D) Retained Earnings A company
    D Both A and B
    Monica1966's Avatar
    Monica1966 Posts: 29, Reputation: 1
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    #2

    Jul 17, 2011, 07:48 AM
    I have worked on this all evening trying to figure it out
    I am thinking the answer is A Investment in B company
    Just Looking's Avatar
    Just Looking Posts: 1,610, Reputation: 480
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    #3

    Jul 17, 2011, 11:31 AM

    The purpose of a consolidated financial statement is to show the results of two related companies as if the two separate companies were actually an individual company. You want to eliminate the effects of intercompany transactions. This includes stock ownership, debt, revenue, and expenses. Does this help you understand the question?
    Monica1966's Avatar
    Monica1966 Posts: 29, Reputation: 1
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    #4

    Jul 17, 2011, 01:36 PM
    Comment on Just Looking's post
    Yes it does,Thank you very much for your help, I was very confused with it ,but now that you explained it that way I figured it out
    Thanks again
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