Plum Corporation acquired 80 percent of Saucy Corporation's common shares on January 1,20X7,at underlying book value.At that date,the fair value of the noncontrolling interest was equal to 20 percent of the book value of Saucy Corporation.Saucy prepared the following balance sheet as of December 31,20X8:
On January 1,20X9,Saucy declares a stock dividend of 9,000 shares on its $5 par value common stock.The current market price per share of Saucy stock on January 1,20X9,is $20.
-Based on the preceding information,the investment elimination entry required to prepare a consolidated balance sheet immediately after the stock dividend is issued will include a debit to Retained Earnings for:

Question

Plum Corporation acquired 80 percent of Saucy Corporation's common shares on January 1,20X7,at underlying book value.At that date,the fair value of the noncontrolling interest was equal to 20 percent of the book value of Saucy Corporation.Saucy prepared the following balance sheet as of December 31,20X8:
  On January 1,20X9,Saucy declares a stock dividend of 9,000 shares on its $5 par value common stock.The current market price per share of Saucy stock on January 1,20X9,is $20.
-Based on the preceding information,the investment elimination entry required to prepare a consolidated balance sheet immediately after the stock dividend is issued will include a debit to Retained Earnings for:

Quizplus · Accepted Answer

The correct answer is A) $200,000 because the investment elimination entry to prepare a consolidated balance sheet after a stock dividend involves eliminating the parent company's investment in the subsidiary against the subsidiary's equity accounts, including retained earnings. The amount specified, $200,000, directly corresponds to the impact of the stock dividend on retained earnings, requiring an adjustment to reflect the consolidated entity's financial position accurately.

Plum Corporation Acquired 80 Percent of Saucy Corporation's Common Shares