At the Beginning of 20X1, Rally Ltd B) C) D)No Entry Is Required

At the beginning of 20X1, Rally Ltd. acquired 18% of Neily Co. for $90,000. Rally has significant influence over Neily. Rally records the investment in Neily using the cost method. Rally's share of Neily's income was $29,000 for 20X1 and $33,000 for 20X2. Rally received dividends from Neily of $25,000 in 20X1 and $35,000 in 20X2. For reporting purposes in 20X2, what adjustment must be made to recognize Rally's share of Neily's 20X2 income?

A) $$\begin{array} { | c | c | } \hline \text { DR Income receivable from Neily } & 33,000 \\\hline \text { CR Equity in earnings of Neily } & 33,000 \\\hline\end{array}$$
B) $$\begin{array} { | c | c | } \hline \text { DR Income receivable from Neily } & 33,000 \\\hline \text { CR Investment in Neily } & 33,000 \\\hline\end{array}$$
C) $$\begin{array} { | c | c | } \hline \text { DR Investment in Neily } & 33,000 \\\hline \text { CR Equity in earnings of Neily } & 33,000 \\\hline\end{array}$$
D) No entry is required