Question

Winston Corporation owns 25% of the voting stock of Tole Corporation and uses the equity method in recording the investment. Tole Corporation reported a $50,000 net loss. Winston Corporation's entry would include a
a. debit to the investment account for $50,000.
b. debit to the cash account for $12,500.
c. debit to the investment account for $12,500.

Answer 1

Answer:

c. debit to the investment account for $12,500.

Explanation:

The computation is shown below:

= Net loss reported × owning percentage

= $50,000 × 25%

= $12,500

Simply we multiplied the reported net loss and its owning percentage so that the accurate loss amount can come

Since it is a net loss, so it would be debited to the investment account for $12,500

Hence, all other options are wrong except option c.