Dover Company owns 90% of the capital stock of a foreign subsidiary located in Italy.Dover's accountant has just translated the accounts of the foreign subsidiary and determined that a debit translation adjustment of $80,000 exists.If Dover uses the fully adjusted equity method for its investment,what entry should Dover record in order to recognize the translation adjustment?
A)Option A
B)Option B
C)Option C
D)Option D

Question

Quizplus · Accepted Answer

Under the fully adjusted equity method, Dover should recognize its share of the translation adjustment in its investment account. Since Dover owns 90% of the subsidiary, it should record a debit to the investment account for $72,000 (90% of $80,000) and a credit to a translation adjustment account for the same amount.

Dover Company Owns 90% of the Capital Stock of a Foreign