Zach Company Owns 45% of the Voting Stock of Tomas

question 120

Multiple Choice

Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported a $20,000 net loss. Zach Company's entry would include a

• A) Credit to cash for $9,000
• B) Debit to the investment account for $9,000
• C) Credit to the investment account for $9,000
• D) Credit to a loss account for $9,000

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Definitions:

Payout Ratio

Measures the percentage of earnings distributed in the form of cash dividends; computed by dividing cash dividends declared on common stock by net income.

Net Income

The amount of money remaining from revenues after subtracting all costs, expenses, and taxes, indicating the profit earned.

Dividends

Payments made by a corporation to its shareholder members, distributed from the company's profits.

Note Payable

A written agreement where one party promises to pay another a definite sum of money at a specified future date or on demand.