If an interim dividend is paid by a subsidiary to its parent, the consolidation entry to eliminate the transaction is which of the following?
A) Dr Interim dividend paid; Cr Dividend revenue
B) Dr Dividend revenue; Cr Interim dividend paid
C) Dr Dividend revenue; Cr Dividend payable
D) Dr Interim dividend paid; Cr Cash

Question

Quizplus · Accepted Answer

The consolidation entry to eliminate the transaction of an interim dividend paid by a subsidiary to its parent would be to debit the Dividend revenue account and credit the Interim dividend paid account. This is because the parent company would record the dividend revenue in their own books, and the subsidiary would reduce its assets by paying out the dividend. Option A is incorrect because the company does not record an expense for an interim dividend paid. Option C is incorrect because a dividend payable would be recorded if the dividend had been declared but not yet paid, which is not the case here. Option D is incorrect because it only records the payment of the dividend, but does not eliminate the transaction in the consolidation process.

If an Interim Dividend Is Paid by a Subsidiary to Its