Under the partial equity method, the workpaper entry that reverses the effect of subsidiary income for the year includes a:
A) credit to Equity in Subsidiary Income.
B) debit to Subsidiary Income Sold.
C) debit to Equity in Subsidiary Income.
D) credit to Equity in Subsidiary Income and debit to Subsidiary Income Sold.

Question

Quizplus · Accepted Answer

Under the partial equity method, the investment in the subsidiary is adjusted for the investor's share of the subsidiary's income or loss. When reversing the effect of subsidiary income for the year, a debit to Equity in Subsidiary Income is made to reduce the investment account by the amount of income recognized. This corrects the investment balance for the portion of subsidiary income that was previously recognized.

Under the Partial Equity Method, the Workpaper Entry That Reverses