Hello, I do not understand the logic in the following journal entry (advanced accounting). (Parent is 20% owner and investee company earned $200K; equity method necessary). The investment in investee debit entry is increasing the investment account to reflect investee's earnings, but isn't the Equity in investee company credit entry also increasing the equity in investee account? Investment in investee company $40,000 (debit) Equity in investee company ___________ $40,000 (credit)
Hello,
I do not understand the logic in the following
The investment in investee debit entry is increasing the investment account to reflect investee's earnings, but isn't the Equity in investee company credit entry also increasing the equity in investee account?
Investment in investee company $40,000 (debit)
Equity in investee company ___________ $40,000 (credit)
Equity method is the accounting method in which the investor's share of profits or losses in investee company will be debited to the investment account and credited to the retained earnings of the company to show the profits/loss distribution of investee company.
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