Waite Co Is a Wholly-Earned Subsidiary of Star Ltd B)

Waite Co. is a wholly-earned subsidiary of Star Ltd. During the year, Waite earned net income of $65,000. Star recorded this income on its books using the equity method. What elimination entry does Star have to make in the consolidation process with respect to this income?

A) $$\begin{array} { | c | c | } \hline \text { DR Equity earnings in Waite } & 65,000 \\\hline \text { CR Retained earnings } & 65,000 \\\hline\end{array}$$
B) $$\begin{array} { | c | c | } \hline \text { DR Equity earnings in Waite } & 65,000 \\\hline \text { CR Investment in Waite } & 65,000 \\\hline\end{array}$$
C) $$\begin{array} { | l | c | } \hline \text { DR Investment in Waite } & 65,000 \\\hline \text { CR Equity earnings in Waite } & 65,000 \\\hline\end{array}$$
D) No entry is required under the equity method.

Correct Answer:

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