1. Zach Company owns 40% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported a $11,011 net loss. Which of the following would be included in Zach Corporation's journal entry?

Select the correct answer.

Debit to the investment account for $4,404.40

Credit to a loss account for $4,404.40

Credit to the investment account for $4,404.40

Debit to the investment account for $11,011.00

2. The equity method of accounting for investments

a. requires a year-end adjustment to revalue the stock to lower of cost or market.

b. requires the investment be increased by the reported net income of the investee.

c. requires the investment be increased by the dividends paid by the investee.

d. requires the investment to be reported at its original cost.