The effect of the adjustment entry at the date of acquisition is to eliminate the ‘Shares in subsidiary’ asset and the:

The effect of the adjustment entry at the date of acquisition is to eliminate the ‘Shares in subsidiary’ asset and the:

Equity of the subsidiary.

Here are the steps to understand this:

1. Shares in Subsidiary: When a parent company acquires a subsidiary, it records the investment as 'Shares in subsidiary' in its books. This is an asset for the parent company.

2. Equity of the Subsidiary: The equity of the subsidiary represents the net assets (total assets minus total liabilities) of the subsidiary. This is recorded in the subsidiary's books.

3. Adjustment Entry at the Date of Acquisition: When preparing consolidated financial statements, an adjustment entry is made to eliminate the 'Shares in subsidiary' asset from the parent's books and the equity of the subsidiary from the subsidiary's books. This is necessary to avoid double counting of the net assets in the consolidated financial statements.

4. Effect of the Adjustment Entry: The effect of the adjustment entry is to eliminate the 'Shares in subsidiary' asset and the equity of the subsidiary. This ensures that the consolidated financial statements present the financial position of the group as a single economic entity, rather than the sum of separate entities.

Therefore, the effect of the adjustment entry at the date of acquisition is to eliminate the ‘Shares in subsidiary’ asset and the equity of the subsidiary.