Pelba created Selba, a 100%-owned subsidiary, several years ago. For 2006, Selba reported net income of $70,000 and declared and paid cash dividends of $40,000. At 12/31/06, Selba's equity accounts were as follows:
$\begin{array}{lr}
\text {Common Stock }&\$100,000\
\text {Additional Paid-in Capital }&300,000\
\text { Retained Earnings.}&490,000\
\end{array}$
Required:
a. What entry(s) were made in consolidation at 12/31/06, assuming the parent used the equity method?
b. What entry(s) were made in consolidation at 12/31/06, assuming the parent used the cost method?

Question

Pelba created Selba, a 100%-owned subsidiary, several years ago. For 2006, Selba reported net income of $70,000 and declared and paid cash dividends of $40,000. At 12/31/06, Selba's equity accounts were as follows:
 $\begin{array}{lr}
\text {Common Stock }&\$100,000\
\text {Additional Paid-in Capital }&300,000\
\text { Retained Earnings.}&490,000\
\end{array}$
 Required:
a. What entry(s) were made in consolidation at 12/31/06, assuming the parent used the equity method?
b. What entry(s) were made in consolidation at 12/31/06, assuming the parent used the cost method?

Quizplus · Accepted Answer

The Answer of Pelba created Selba, a 100%-owned subsidiary, several years ago. For 2006, Selba reported net income of $70,000 and declared and paid cash dividends of $40,000. At 12/31/06, Selba's equity accounts were as follows:
 $\begin{array}{lr}
\text {Common Stock }&\$100,000\
\text {Additional Paid-in Capital }&300,000\
\text { Retained Earnings.}&490,000\
\end{array}$
 Required:
a. What entry(s) were made in consolidation at 12/31/06, assuming the parent used the equity method?
b. What entry(s) were made in consolidation at 12/31/06, assuming the parent used the cost method?