Plover Corporation Accounts for Its 80%-Owned Purchased Subsidiary, Swallow Company

Multiple Choice

Plover Corporation accounts for its 80%-owned purchased subsidiary, Swallow Company, under the equity method of accounting. For the fiscal year ended March 31, 2006, Swallow had a net income of $100,000, but declared no dividends. Depreciation and amortization of differences between current fair values and carrying amounts of Swallow's identifiable net assets for the year ended March 31, 2006, totaled $40,000. Plover's closing entry for the year ended March 31, 2006, includes a:

A) Credit of $48,000 to Intercompany Investment Income
B) Credit of $60,000 to Retained Earnings of Subsidiary
C) Debit of $60,000 to Intercompany Investment Income
D) Credit of $48,000 to Retained Earnings of Subsidiary