Question

rex co. holds a 30% of the shares of stock in jones, inc. jones reported net income of $60,000 during the period. rex will report its 30% of the earnings with a (debit/credit) to earnings from equity method investment in the amount of $ .

Answer 1

If inc. jones reported net income of $60,000 during the period. rex will report its 30% of the earnings with a credit  to earnings from equity method investment in the amount of $18,000.

Equity method investment

Since rex. co hold 30 percent of the shares of stock in jones inc which in  turn means that jones will report 30% of the earning (net income) which is $18,000 calculated as (30%×$60,000).

The amount of the earnings  which is $18,000 will be credited to earning from  equity method investment.

Equity method investment=30%×$60,000

Equity method investment=$18,000 (credited)

Therefore If inc. jones reported net income of $60,000 during the period. rex will report its 30% of the earnings with a credit  to earnings from equity method investment in the amount of $18,000.

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