At the Beginning of 20X1, Rally Ltd B) C) D)No Entry Is Required

question 36

Multiple Choice

At the beginning of 20X1, Rally Ltd. acquired 18% of Neily Co. for $90,000. Rally has significant influence over Neily. Rally records the investment in Neily using the cost method. Rally's share of Neily's income was $29,000 for 20X1 and $33,000 for 20X2. Rally received dividends from Neily of $25,000 in 20X1 and $35,000 in 20X2. For reporting purposes in 20X2, what adjustment must be made to recognize Rally's share of Neily's 20X2 income?

• A) \[\begin{array} { | c | c | }
• \hline \text { DR Income receivable from Neily } & 33,000 \\
• \hline \text { CR Equity in earnings of Neily } & 33,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | c | }
• \hline \text { DR Income receivable from Neily } & 33,000 \\
• \hline \text { CR Investment in Neily } & 33,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | c | }
• \hline \text { DR Investment in Neily } & 33,000 \\
• \hline \text { CR Equity in earnings of Neily } & 33,000 \\
• \hline
• \end{array}\]
• D)No entry is required

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Definitions:

Stretching Frequency

A measure of how often a chemical bond undergoes a vibration between atoms, used in IR spectroscopy to help identify functional groups.

IR Spectroscopy

A technique used in chemistry to identify molecules based on the absorption of infrared radiation at different wavelengths.

IR Spectroscopy

A technique used in chemistry to identify molecular structures based on the absorption of infrared radiation, which causes vibrational and rotational transitions in molecules.

IR Absorptions

The process by which molecules absorb specific frequencies of infrared light, causing transitions in their vibrational energy levels, useful for molecular identification.