The Consolidation Elimination Entry Required to Remove Any Dividends Received

question 62

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 sub) would be:

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

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Definitions:

Content Validity

Refers to the extent to which a test measures all aspects of the concept it intends to measure.

Alternate-form Reliability

Refers to a measure's reliability assessed by comparing different versions of the test that are created to be equivalent.

Test-retest Reliability

A measure of consistency where the same test is administered to the same group at two different points in time to assess its stability over time.

Predictive Validity

The extent to which a score on a scale or test predicts scores on some criterion measure.