42. On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for $40,000. At the time of the transfer, the asset had an original cost (to Republic) of $60,000 and accumulated depreciation of $25,000. The equipment has a five year estimated remaining life. Barre reported net income of $250,000, $270,000 and $310,000 in 2020, 2021, and 2022, respectively. Republic received dividends from Barre of $90,000, $105,000 and $120,000 for 2020, 2021, and 2022, respectively. Assume Republic uses the equity method to account for its investment in Barre.

What is the balance in the pre-consolidation Income (loss) from Subsidiary account for 2020?

Select one:

A. $246,000

B. $245,750

C. $250,000

D. $249,250

43. Frisco Corporation uses the equity method of accounting for its investment in a 30%-owned investee that earned $56,000 and paid $18,000 in dividends. As a result, Frisco Corporation made the following entries:

Equity Investment

16,800

Equity Income

16,800

Cash

5,400

Dividend Revenue

5,400

What effect will these entries have on Frisco Corporation's balance sheet?

Select one:

A. Investment understated; retained earnings understated

B. Investment overstated; retained earnings understated

C. Investment overstated; retained earnings overstated

D. No effect