Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporationreported a $11,100 net loss. Zach Company's entry would include aOa. credit to cash for $4,995Ob. credit to the investment account for $4,995Oc. credit to a loss account for $4,995Od. debit to the investment account for $4,995K PreviousNext3:23 PM53°F Sunny ^12/14/2021a.近

Equity method is used to value a company's investment in another company. Net profit of the investee company increases the investor's asset value whereas loss of the investee company decreases the investor's asset value. Option b) Credit to investment account $4,995 . Explanation: Tomas Corporation's total loss = $11,100 Zach's share = 45% of 11,100 = $4,995. Journal Entry will be : Equity Income in Tomas Corporation $4,995 Investment in Tomas Corporation $4,995 ( Share in loss of Tomas Corporation credited to investment account)

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Zach Company owns 45% of the voting stock of Tomas C reported a $11,100 net loss. Zach Company's entry woule Oa. credit to cash for $4,995 Ob. credit to the investment account for $4,995 Oc. credit to a loss account for $4,995 Od. debit to the investment account for $4,995

Zach Company owns 45% of the voting stock of Tomas C reported a $11,100 net loss. Zach Company's entry woule Oa. credit to cash for $4,995 Ob. credit to the investment account for $4,995 Oc. credit to a loss account for $4,995 Od. debit to the investment account for $4,995

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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