When a Company Applies the Initial Method in Accounting for Its

question 45

Multiple Choice

When a company applies the initial method in accounting for its investment in a subsidiary and the subsidiary reports income in excess of dividends paid,what entry would be made for a consolidation worksheet? $\begin{array} { | l | l | } \hline \text { A) } & \text { Retained earnings } \\\hline & \text { Investment in subsidiary } \\\hline \text { B) } & \text { Investment in subsidiary } \\\hline & \text { Retained earnings } \\\hline \text { C) } & \text { Investment in subsidiary } \\\hline & \text { Equity in subsidiary's income } \\\hline \text { D) } & \text { Equity in subsidiary's income } \\\hline & \text { Investment in subsidiary } \\\hline \text { E) } & \text { Additional paid-in capital } \\\hline & \text { Retained earnings } \\\hline\end{array}$

• A)A above
• B)B above
• C)C above
• D)D above
• E)E above

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Definitions:

Manufacturer

An entity or enterprise that makes goods through a process involving raw materials, components, or assemblies, usually on a large scale with machinery.