What effect do subsidiary treasury stock holdings have at th

What effect do subsidiary treasury stock holdings have at the time the subsidiary is acquired? How should the treasury stock be treated on consolidated work papers?

Solution

ANSWER:

The determination of the total equity and percentage interest acquired is based on shares outstanding; therefore treasury shares shouldn\'t be included. The account of treasury stock must be eliminated by offsetting it against subsidiary stockholder equity accounts. The affected accounts and total amounts involved will depend upon whether the par or cost method is applied to account for the treasury stock.