Equity methods. Prepare journal entries for the following transactions, assuming ABC uses the equity method for...
- Equity methods.
Prepare journal entries for the following transactions, assuming ABC uses the equity method for accounting for its investments in XYZ Co.
- At the beginning of the year 2018, ABC bought 20% of XYZ's common stock at its book value. Total book value of all XYZ's common stock was $800,000 on this date.
- During the year 2018, XYZ reported $60,000 of net income and paid $30,000 of dividends.
- During the year 2019, XYZ reported a net loss of $10,000 and paid $5,000 of dividends.
Homework Answers
Journal
| Date | Account title | Debit | Credit |
| 2018 | Stock investment | 160,000 | |
| Cash | 160,000 | ||
| Stock investment (60,000 x 20%) | 12,000 | ||
| Revenue from investment in XYZ Corporation | 12,000 | ||
| Cash (30,000 x 20%) | 6,000 | ||
| Stock investment | 6,000 | ||
| 2019 | Loss from investment in XYZ Corporation | 2,000 | |
| Stock investment (10,000 x 20%) | 2,000 | ||
| Cash (5,000 x 20%) | 1,000 | ||
| Stock investment | 1,000 |
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