At the date of acquisition a subsidiary had recorded a dividend payable of $10 000.The consolidation adjustment needed at the date of acquisition in relation to this event is:
A)DR Dividend payable $10 000 CR Dividend receivable $10 000
B)DR Dividend revenue $10 000 CR Dividend declared $10 000
C)DR Shares in subsidiary $10 000 CR Dividend receivable $10 000
D)DR Cash $10 000 CR Shares in subsidiary $10 000.

Question

Quizplus · Accepted Answer

At the date of acquisition, the parent company would not have received the dividend from its subsidiary. Therefore, the subsidiary would have recorded a dividend payable of $10,000. As per the consolidation process, this payable balance needs to be eliminated and adjusted with the dividend receivable. Thus, the consolidation adjustment needed is to debit the dividend payable account with $10,000 in the subsidiary's books and credit the dividend receivable account with the same amount in the parent company’s books. Hence, Choice A is the correct answer.

At the Date of Acquisition a Subsidiary Had Recorded a Dividend