There are alternative ways to calculate consolidated retained earnings. One of the methods requires adjustments to be made to the parent company's separate-entity ending retained earnings balance as of the consolidation date. What adjustments must be made to determine ending consolidated retained earnings?
A)Add in the dividends from the subsidiary to the parent and the parent's share of the subsidiary's adjusted income.
B)Subtract the dividends from the subsidiary to the parent and the parent's share of the subsidiary's adjusted income.
C)Add in the dividends from the subsidiary to the parent and subtract the parent's share of the subsidiary's adjusted income.
D)Subtract the dividends from the subsidiary to the parent and add in the parent's share of the subsidiary's adjusted income.

Question

Quizplus · Accepted Answer

To determine ending consolidated retained earnings, adjustments include subtracting dividends received from the subsidiary (since these are intra-group transactions and do not affect consolidated earnings) and adding the parent's share of the subsidiary's adjusted income to reflect the parent's share of earnings generated by the subsidiary.

There Are Alternative Ways to Calculate Consolidated Retained Earnings