At the beginning of 2011,Parling Food Services acquired a 90% interest in Simmons' Orchards when Simmons' book values of identifiable net assets equaled their fair values.On December 26,2011,Simmons declared dividends of $50,000,and the dividends were unpaid at year-end.Parling had not recorded the dividend receivable at December 31.A consolidated working paper entry is necessary to
A)enter $50,000 dividends receivable in the consolidated balance sheet.
B)enter $45,000 dividends receivable in the consolidated balance sheet.
C)reduce the dividends payable account by $45,000 in the consolidated balance sheet.
D)eliminate the dividend payable account from the consolidated balance sheet.

Question

Quizplus · Accepted Answer

Since Parling owns 90% of Simmons' Orchards, they are entitled to receive 90% of the declared dividends of $50,000, which is $45,000. Therefore, the consolidated working paper entry should reduce the dividends payable account by $45,000 in the consolidated balance sheet. The dividend receivable has not been recorded by Parling at the end of the year, but it should be recorded separately in their own books.

At the Beginning of 2011,Parling Food Services Acquired a 90