Asked by Sophony Henri on Jun 13, 2024
Verified
Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported a $20,000 net loss. Zach Company's entry would include a
A) credit to cash for $9,000
B) debit to the investment account for $9,000
C) credit to the investment account for $9,000
D) credit to a loss account for $9,000
Equity Method
An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and subsequently adjusted for the investor's share of the investee's profits or losses.
Voting Stock
Shares of a company that grant the shareholder the right to vote on corporate matters and elect the board of directors.
Net Loss
Net loss occurs when a company's expenses exceed its revenues during a specific accounting period, resulting in a negative profit.
- Recognize how an investor's share of periodic net income or loss from an investee is recorded under the equity method.
Verified Answer
Learning Objectives
- Recognize how an investor's share of periodic net income or loss from an investee is recorded under the equity method.
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