Company A owns all of the voting stock of Company B at book value and accounts for its investment using the equity method. In 2018 Company B reported income of $40,000 and under the equity method Company A showed investment income of $40,000. What is the necessary worksheet entry connected with Company A showing investment income?

Multiple choice

a) None needed since investment income and subsidiary income are the same.

b) DEBIT: investment in B $40,000. CREDIT: investment income $40,000.

c) DEBIT: investment income $40,000. CREDIT: investment in B $40,000.

d) DEBIT: retained earnings $40,000. CREDIT: investment in B $40,000