A parent company uses the equity method to record its investment in its subsidiary. To check the balance of the consolidated retained earnings, what amount should be added to the parent company's separate-entity retained earnings?
A)Balance of the equity in the earnings of the subsidiary account
B)Net income from the subsidiary company's separate-entity statement of income
C)Balance of the investment account
D)Increase in the balance of the investment account

Question

Quizplus · Accepted Answer

The increase in the balance of the investment account reflects the share of the subsidiary's earnings attributed to the parent and not yet distributed as dividends. This amount should be added to the parent's retained earnings to reflect the consolidated retained earnings accurately.

A Parent Company Uses the Equity Method to Record Its