Investment In Ramble Equity In Subsidiary Earnings Herbert's Internal Income Add: Equity in Investee Income Net Income Retained Earnings 1/1/14 Add: Net Income 1 Less: Dividends Paid Retained Earnings 12/31/14 Note: Since the equity method is used, Herbert's net income and retained earnings includes the accrual for the subsidiary's income. So the consolidated retained earnings will be the same as Herbert's retained earnings