On January 1, 2019, Power Corporation acquired 90% of Star Company's voting stock, at underlying book value. The fair value of the noncontrolling interest was equal to 10% of the book value of Star at that date. Power uses the equity method in accounting for its ownership of Star. On December 31, 2019, the trial balances of the two companies are as follows:

Item

Power

Star

Debit

Credit

Debit

Credit

Current Assets

$200,000

$120,000

Depreciable Assets

300,000

225,000

Investment in Star

139,500

Depreciation Expense

30,000

25,000

Other Expenses

100,000

60,000

Dividends Declared

30,000

10,000

Accumulated Depreciation

$120,000

$75,000

Current Liabilities

62,000

25,000

Long-Term Debt

75,000

90,000

Common Stock

100,000

75,000

Retained Earnings

120,000

65,000

Sales

300,000

110,000

Income from Star

22,500

Total

$799,500

$799,500

$440,000

$440,000

The required basic elimination entry as of December 31, 2019.

Select one:

a. Dr. Common Stock S 75,000 Dr. Retained Earnings - S 65,000 Dr. Income from Subsidiary S 22,500 Dr. Non-Controlling Interest in Net Income 2,500 || Cr. Dividends Declared P 10,000 Cr. Investment in Subsidiary P 124,000 Cr. Non-Controlling Interest in Net Asset 31,000

b. Dr. Common Stock S 75,000 Dr. Retained Earnings - S 65,000 Dr. Income from Subsidiary P 22,500 Dr. Non-Controlling Interest in Net Income 2,500 || Cr. Dividends Declared S 10,000 Cr. Investment in Subsidiary P 124,500 Cr. Non-Controlling Interest in Net Asset 31,000

c. Dr. Common Stock S 75,000 Dr. Retained Earnings - S 65,000 Dr. Income from Subsidiary S 22,500 Dr. Non-Controlling Interest in Net Income 2,500 || Cr. Dividends Declared P 10,000 Cr. Investment in Subsidiary P 139,500 Cr. Non-Controlling Interest in Net Asset 15,500

d. Dr. Common Stock S 75,000 Dr. Retained Earnings - S 65,000 Dr. Income from Subsidiary P 22,500 Dr. Non-Controlling Interest in Net Income 2,500 || Cr. Dividends Declared S 10,000 Cr. Investment in Subsidiary P 139,500 Cr. Non-Controlling Interest in Net Asset 15,500

ACCT432 - First Hour Exam - October 08, 2020