The Consolidation Elimination Entry Required to Remove Any Dividends Received

question 43

Multiple Choice

The consolidation elimination entry required to remove any dividends received from a subsidiary prior to the preparation of consolidated financial statements (assuming that the parent uses the cost method to record its investment in the subsidiary) would be:

• A)
• \(\begin{array}{|l|r|r|}
• \hline & \text { Debit } & \text { Credit } \\
• \hline \text { Equity method income-Parent } & \$ \$ \$ & \\
• \hline \text { Retained Earnings-Parent } & & \$ \$\$ \\
• \hline
• \end{array}\)
• B)
• \[\begin{array} { | l | r | r | }
• \hline & \text { Debit } & \text { Credit } \\
• \hline \text { Dividend Income-Subsidiary } &\$\$\$ & \\
• \hline \text { Investrnent in Subsidiary } & &\$\$\$ \\
• \hline
• \end{array}\]
• C)
• \[\begin{array} { | l | r | r | }
• \hline & \text { Debit } & \text { Credit } \\
• \hline \text { Dividend Income-Parent } &\$\$\$& \\
• \hline \text { Dividends-Subsidiary } & &\$\$\$ \\
• \hline
• \end{array}\]

---

Definitions:

Periodic Method

A method of inventory accounting in which the cost of goods sold is determined at the end of an accounting period.

Journal Entries

The recording of financial transactions in a journal in a way that they show the debit and credit effect on the accounting system.

Notes Payable (Old)

Obligations in the form of written promissory notes that a business owes to creditors or banks, with "Old" implying they are not recent liabilities.

Interest Expense

Interest expense refers to the cost incurred by an entity for borrowed funds.