On January 1,2014,Pauline Company Acquired 90% of Stephen Company at a Cost

Multiple Choice

On January 1,2014,Pauline Company acquired 90% of Stephen Company at a cost of $90,000.On January 1,2014,Stephen Company acquired 10% of Pauline Company at a cost of $10,000. On January 1,2014,the following data is available:
$\begin{array}{llll} \underline{\text {Stephen Company}}& &\underline{\text {Pauline Company}}\\\text { Common Stock } & \$ 50,000 & \text { Common Stock } & \$ 50,000 \\\text { Retained Earnings } & \$ 50,000 & \text { Retained Earnings } & \$ 50,000 \\\text { Assets fair value } & \$ 100,000 & \text { Assets fair value } & \$ 100,000 \\\text { Assets book value } & \$ 100,000 & \text { Assets book value } & \$ 100,000 \\\text { L.iabilities } & \$ 0 & \text { L.iabilities } & \$ 0\end{array}$
At December 31,2014,the following data is available:
On Pauline Books:
On Stephen Books:
Assuming the treasury stock method is used,what elimination entry is needed for the Investment in Pauline at December 31,2014?

A) $$\begin{array} { | c | c | } \hline \text { Retained earnings } & 5,000 \\\hline \text { Common stock } & 5,000 \\\hline \text { Investment in Pauline } &10,000 \\\hline\end{array}$$
B) $\begin{array}{|c|c|}\hline\text { Investment in Stephen } & 10,000 \\\hline \text { Investment in Pauline } & 10,000 \\\hline\end{array}$
C) $\begin{array}{|c|l|}\hline\text { Income from Pauline } & 10,000 \\\hline \text { Investment in Pauline } & 10,000 \\\hline\end{array}$
D) $\begin{array}{|l|c|}\hline\text { Treasury stock } & 10,000 \\\hline \text { Investment in Pauline } & 10,000 \\\hline\end{array}$