Noler Company owns 28% of Lauer Company. For the current year, Lauer reports net income of...

Question:

Noler Company owns 28% of Lauer Company. For the current year, Lauer reports net income of $197,000 and declares and pays a $55,000 cash dividend.

Record Noler's equity in Lauer's net income and the receipt of dividends from Lauer for December 31.

Investment

When a company obtain a significant influence over another company, equity method of accounting for investment must be used. Where income increases the balance of Investment Account and dividends decreases the investment account balance.

Answer and Explanation:

Account Title Debit Credit
Investment Account 55,160
Investment Income 55,160
Cash 55,000
Investment Income 55,000

Learn more about this topic:

Loading...
Investment Risks: Definition & Types

from CFP Certification Exam Study Guide - Certified Financial Planner

Chapter 8 / Lesson 1
4.6K

Related to this Question

Explore our homework questions and answers library