When a Company Applies the Initial Value Method in Accounting

question 118

Multiple Choice

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

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

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