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Q1: If a company purchases a subsidiary that has a negative equity, what is the accounting entry, in other words, how is this investment recorded in the parent’s stand alone financials, is it the same:
Dr Investment, Cr cash ? – This does not make much sense since you are buying negative equity.Q2: if the subsidiary incurs more losses in the second year, again, what is the accounting entry in the stand alone financials?
Thanks
Hi,
What do you mean by acquiring negative equity please?
If the subsidiary makes a loss then the parent records its share of the post acquisition losses in the same way it records the post acquisition profits.
Thanks
Hello,
I mean acquiring an entity that has negative equity on the balance sheet. Many entities have a lot of accumulated losses which turns their equity negative.
Kind Regards
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