FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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
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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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