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lets take a look at the equity method from chapter 16 so when youre dealing with stock investments you have to make the decision as to whether youre working under the cost method or the equity method and the way that we decide that is based off of how much ownership in stock you have so if you have between 0 and 20 percent thats the cost method and if you have between 20 and 50 percent because you have that docHub influence you change up how you value these investments and we use whats called the equity method so we need to prepare the journal entries from for Knoller company for the following transactions so the first one Knoller company acquires 25 percent of the common stock of Laur company for a hundred and fifty thousand dollars on January 1st 2019 and then at the end of 2019 our company reports a net income of $180,000 and declares and pays a $50,000 cash dividend so we have 25 percent ownership of Laur company that puts us between 20 and 50 which tells us we now have
