10. Help me selecting the right answer. Thank you **Accounting Journal Entries for Equity Method**Land Services, Inc. owns 32% of the voting stock of World Investments, Inc. During the year 2024, World Investments, Inc. earned profits of $250,000. Using the equity method, which of the following journal entries should Land Services record?1. **Option A** - Debit: Cash $80,000 - Credit: Equity Investments—World Investments, Inc. $80,0002. **Option B** - Debit: Cash $80,000 - Credit: Dividend Revenue $80,0003. **Option C** - Debit: Equity Investments—World Investments, Inc. $80,000 - Credit: Revenue from Investments $80,0004. **Option D** - Debit: Equity Investments—World Investments, Inc. $250,000 - Credit: Cash $250,000**Explanation of Correct Entry:**- When using the equity method, the investor recognizes a share of the investee’s profits. Since Land Services owns 32%, they would recognize 32% of $250,000 in profits, which is $80,000. The correct entry would involve increasing the investment account by this amount, signifying an increase in ownership equity resulting from the investee's profits. There is no cash exchange involved directly in recording this share of profits.**Analysis:**- **Option A** incorrectly suggests exchanging cash for an increase in the investment account, rather than recognizing the earnings.- **Option B** treats the earnings as dividend revenue, which is not consistent with the equity method.- **Option C** correctly represents the increase in the investment account.- **Option D** reflects an incorrect transaction as it suggests a cash transaction for the entire profit, which does not occur under the equity method.

A business transaction is documented in the accounting records of the company using a journal entry. Journal entries are often made in the main ledger, but they can also be produced in a subsidiary ledger and subsequently rolled forward to the general ledger after being summarized. After then, the general ledger is used to compile the company's financial statements.Answer: Equity Investment - World Investment, Inc ($250,000 x 32%) $80,000 Revenue from Investments $80,000 Hence, option (c) is the correct option

Business

Accounting

Land Services, Inc. owns 32% of voting stock of World Investments, Inc. During the year 2024, World Investments, Inc. earned profits of $250,000. Under the equity method, which of the following journal entries will Land Services record? O Cash 80,000 Equity Investments-World Investments, Inc. O Cash Dividend Revenue O Equity Investments-World Investments, Inc. Revenue from Investments O Equity Investments-World Investments, Inc. Cash 80,000 80,000 250,000 80,000 80,000 80,000 250,000

Land Services, Inc. owns 32% of voting stock of World Investments, Inc. During the year 2024, World Investments, Inc. earned profits of $250,000. Under the equity method, which of the following journal entries will Land Services record? O Cash 80,000 Equity Investments-World Investments, Inc. O Cash Dividend Revenue O Equity Investments-World Investments, Inc. Revenue from Investments O Equity Investments-World Investments, Inc. Cash 80,000 80,000 250,000 80,000 80,000 80,000 250,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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