Company A Limited owns 90% of the share capital of Company B Limited.Company B Limited paid a dividend of $20 000 during the financial period.The adjustment entries in the consolidation worksheet for the dividend include:
A)DR Dividend revenue $18 000
B)DR Dividend revenue $20 000
C)DR Dividend payable $18 000
D)DR Dividend receivable $20 000.

Question

Quizplus · Accepted Answer

When consolidating financial statements, dividends received by a subsidiary from its parent company (or vice versa) are eliminated as intercompany transactions. In this case, since Company A owns 90% of Company B's shares, the elimination entry for the dividend received by Company B would be to credit the Dividend revenue account for $18,000 (90% of $20,000). Therefore, the correct adjustment entry would be to debit Dividend revenue for $18,000.

Company a Limited Owns 90% of the Share Capital of Company