Singh Ltd Is a Wholly Owned Subsidiary of Ross Co

Singh Ltd. is a wholly owned subsidiary of Ross Co. At the beginning of 20X4, Ross acquired a machine for $350,000 and sold it to Singh for $437,500. The machine will be depreciated over five years using the straight-line method with no residual value.
-In preparing the consolidated financial statements for the second year after the sale to Singh, Ross made the following journal entry: $$\begin{array} { | c | c | } \hline \text { DR Accumulated depreciation-machine } & 17,500 \\\hline \text { CR Depreciation expense-machine } & 17,500 \\\hline\end{array}$$ What other adjustment must be made in preparing the consolidated financial statements?

A) $$\begin{array} { | c | c | } \hline \text { DR Opening retained earnings } & 37,500 \\\hline \text { CR Machine } & 87,500 \\\hline\end{array}$$
B) $$\begin{array} { | l | l | } \hline \text { DR Opening retained earnings } & 70,000 \\\hline \text { DR Accumulated depreciation-machine } & 17,500 \\\hline \text { CR Machine } & 87,500 \\\hline\end{array}$$
C) $$\begin{array} { | l | l | } \hline \text { DR Accumulated depreciation-machine } & 37,500 \\\hline \text { CR Machine } & 87,500 \\\hline\end{array}$$
D) $$\begin{array} { | l | l | } \hline \text { DR Closing retained earnings } & 70,000 \\\hline \text { DR Depreciation expense } & 17,500 \\\hline \text { CR Machine } & 87,500 \\\hline\end{array}$$