Asked by Liezel Paglinawan on Jul 22, 2024
Verified
Pepito Company purchased 40% of the outstanding stock of Reyes Company on January 1. Reyes reported net income of $75,000 and declared dividends of $15,000 during the current year. How much would Pepito adjust its investment in Reyes Company under the equity method?
Equity Method
An accounting technique used to record investments in which the investor has significant influence over the investee but does not control it.
Dividends
Money distributed by a corporation to its members, sharing a part of the company's income.
Investment Adjustment
The process of modifying the value of an investment portfolio due to changes in asset values, investment performance, or investment strategy.
- Acquire knowledge on the implementation of the equity method in recording investments that constitute 20-50% stake in the stocks of another corporation.
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Learning Objectives
- Acquire knowledge on the implementation of the equity method in recording investments that constitute 20-50% stake in the stocks of another corporation.
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