An investor owns 30% of the outstanding common stock of Leshan Company.Leshan Company reports net income of $100,000 for the current year.What journal entry should the investor prepare?

Question

Quizplus · Accepted Answer

The investor should use the equity method, as they own 30% of Leshan Company. They recognize their share of the net income by debiting Equity-Method Investment and crediting Equity-Method Investment Revenue for $30,000 (30% of $100,000).

An Investor Owns 30% of the Outstanding Common Stock of Leshan