If subsidiary net income is $15,000 for Company S and parent Company P has a 75% interest in subsidiary Company S, what would be the elimination entry for the current-year equity income of Company S:
A)Debit Investment in Company S $15,000 and credit Subsidiary Income $15,000
B)Debit Subsidiary Income $11,250 and credit Investment in Company S $11,250
C)Debit Subsidiary Income $15,000 and credit Subsidiary Income $15,000
D)Debit Investment in Company S $11,250 and credit Subsidiary Income $11,250

Question

If subsidiary net income is $15,000 for Company S and parent Company P has a 75% interest in subsidiary Company S, what would be the elimination entry for the current-year equity income of Company S:
A)​Debit Investment in Company S $15,000 and credit Subsidiary Income $15,000
B)​Debit Subsidiary Income $11,250 and credit Investment in Company S $11,250
C)​Debit Subsidiary Income $15,000 and credit Subsidiary Income $15,000
D)​Debit Investment in Company S $11,250 and credit Subsidiary Income $11,250

Quizplus · Accepted Answer

The elimination entry for the current-year equity income of Company S is to debit Investment in Company S for $15,000 and credit Subsidiary Income for $15,000. This entry eliminates the intercompany profit and ensures that only the parent company's share of the subsidiary's net income is included in the consolidated financial statements.

If Subsidiary Net Income Is $15,000 for Company S and Parent