According to purchase accounting, which components of equity should remain after consolidation?

When using purchase accounting during a consolidation transaction, the components of equity that should remain are those that accurately reflect the ownership interest in the acquiring entity as well as any non-controlling interests in the acquired entity.

In this context, common equity represents the ownership stake of the shareholders, and preferred equity provides a layer of capital that must be considered in the overall equity structure. Minority interests, also known as non-controlling interests, are crucial to report because they represent the equity in a subsidiary not attributable to the parent company. This means the total equity reported post-consolidation must include both common and preferred equity, along with any minority interests that reflect additional ownership percentages not held by the acquirer.

The other options may include components that either misrepresent the ownership structure or do not fully account for all necessary elements of equity after consolidation based on the requirements of accounting standards. For instance, options that mention retained earnings specifically may not encompass the proper consolidation of equity interests, as retained earnings are typically evaluated during the integration process, reflecting the accumulated profits of the parent company.