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

---

Definitions:

Variable Overhead

Costs that fluctuate with the level of production or activity, such as utilities and raw materials expenditures.

Line-item Budgets

Budgets that list individual sources of income and expenses, providing a detailed financial overview for monitoring and planning.

Flexible Budgeting

An approach in budgeting that allows for adjusting budget allocations based on varying levels of activity or output.