Winston Corporation owns 21% of the voting stock of Tole Corporation and uses the equity method in recording the investment. Tole Corporation reported a $51,000 net loss. Winston Corporation's entry would include a a.debit to the cash account for $10,710. b.debit to the investment account for $10,710. c.credit to the investment account for $10,710. d.debit to the investment account for $51,000.
Winston Corporation owns 21% of the voting stock of Tole Corporation and uses the equity method in recording the investment. Tole Corporation reported a $51,000 net loss. Winston Corporation's entry would include a a.debit to the cash account for $10,710. b.debit to the investment account for $10,710. c.credit to the investment account for $10,710. d.debit to the investment account for $51,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Winston Corporation owns 21% of the voting stock of Tole Corporation and uses the equity method in recording the investment. Tole Corporation reported a $51,000 net loss. Winston Corporation's entry would include a
a.debit to the cash account for $10,710.
b.debit to the investment account for $10,710.
c.credit to the investment account for $10,710.
d.debit to the investment account for $51,000.
Expert Solution
Step 1
Introduction:
The investment is initially recorded at a cost under the equity method of accounting and later amended to reflect changes in the investor's share of the investee's net assets after the acquisition. When one company, the investor, significantly influences another company, the investee, the equity method is the conventional strategy employed.
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