What is the journal entry to record net income from an investment under the equity method?
Under the equity method, net income will increase the investment amoun, while net losses will decrease the investment amount.
For example, if the company’s share of net income is $50,000, then the company would debit the investment asset account for $50,000 and record income investments in the income statement.
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How to record the impact of net income and dividends under an equity method investment?
As the visual below illustrates, net income increases the investment amount on the balance sheet, while dividends decrease the investment (since dividends are paid out of net income / retained earnings). You must take the total net income and dividends reported by the investee and multiply by the investors ownership % to get the investors […]