Equity investments: Equity investments are stock instruments which claim ownership in the investee company and pay a dividend revenue to the investor company.
Equity method: Equity method is the method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts.
- Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
To journalize: The stock investment transactions for Company P, under the equity method

Want to see the full answer?
Check out a sample textbook solution
Chapter 15 Solutions
Bundle: Accounting, Chapters 1-13, 26th + Working Papers, Chapters 1-17 For Warren/reeve/duchac's Accounting, 26th And Financial Accounting, 14th + ... For Warren/reeve/duchac's Accounting, 26th
- The financial statements of Garner Manufacturing report net sales of $600,000 and accounts receivable of $120,000 and $80,000 at the beginning and end of the year, respectively. What is the average collection period for accounts receivable in days?arrow_forwardWhat is the book value of machineryarrow_forwardAccounting questionsarrow_forward
- Darwin Enterprises purchased machinery on January 1, 2021, at a cost of $75,000. The machinery has an estimated useful life of 6 years and an estimated residual value of $9,000. Darwin’s year-end is December 31st. If Darwin uses the straight-line method to depreciate the asset, what is the book value of the machinery on December 31, 2022? (A). $60,000 (B). $53,000 (C). $66,000 (D). $57,000arrow_forwardA machine that originally cost $30,000 and was depreciated on a straight-line basis has one year of its expected 6-year life remaining. Its current market value is $10,000. What is the corporate tax rate is 30%. What is the cash flow from disposing of the old machine? Correct answerarrow_forwardI need help with this solution and accounting questionarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningAccounting (Text Only)AccountingISBN:9781285743615Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningCorporate Financial AccountingAccountingISBN:9781305653535Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,



