Question
On 1/1/X1, P acquired 80% of S for $800,000 when S's equity included $500,000 capital stock and $500,000 of Retained Earnings. During years X1 and
On 1/1/X1, P acquired 80% of S for $800,000 when S's equity included $500,000 capital stock and $500,000 of Retained Earnings. During years X1 and X2 S earned $100,000 and $120,000, respectively. In both years, S paid $20,000 of dividends. Assume that P uses the cost method and that you are consolidating the pre-closing trial balances of P and S on 12/31/X2. What worksheet entries are required to establish reciprocity between P's Investment and S's equity accounts so that they can be liminated
a. Debit Investment in S for $80,000 and credit P's Retained Earnings for $80,000
b. Debit Investment in S for $100,000 and credit P's Retained Earnings for $100,000
c. Debit Investment in S for $180,000 and credit P's Retained Earnings for $180,000
d. Debit Investment in S for $220,000 and credit P's Retained Earnings for $220,000
e. None of the Above
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