Multiple Choice-3pus Chapter 4- Stock Acquisition- After Date of Acquisition In preparation of a consolidated statements workpaper, dividend income recognized by a parent company for dividends distributed by its subs a. allocated proportionately to consolidated net income and the noncontrolling interest. b. included with parent company income from other sources to constitute consolidated net income. c. eliminated in the workpaper entries. d. eliminated in the parent company's books 1. 2 Under the cost method, the workpaper entry to establish reciprocity a. debits Retained Earnings P Company. b. credits Retained Earnings - P Company c. credits Retained Earnings S Company. d. debits Retained Earnings s Company 2. 3. the parent company's share of the subsidiary's earnings subsequent to the d A parent company received dividends that were not in excess of the investment. How will the parent company's investment account be affected by those dividends under ea Cost Method a. No effect b. Decrease c. No effect d. Decrease Partial Equity Method Decrease No effect No effect Decrease Problem -[12 points] -On January 1, 2007, Prior Industries paid $150,000 to acquire a 75 percent interest in North Gate Company (purchasing 15,00 Gate's 20,000 outstanding shares of common stock). North Gate reported net income in 2007 of $70,000 and in 2008 of $80,000 earned evenly throu respective years. Prior received $6,000 dividends from North Gate in 2007 and $24,000 in 2008. Prior uses equity method to record investment. Prior should record investment income from North Gate during 2007 of