Company A takes a 50% stake in a start-up Company B for US$100,000 (total paid-up capital US$200,000).
As a consulting business, Company B's actual capital requirements are very modest in the initial years (the company was incorporated with such a high capital base mainly to meet government requirements). Therefore Company A decides to take out US$90,000 from Company B as a loan/drawing, promising to return the money to Company B as and when needed.
Using the equity method, how do we record/journalise the investment and loan in Company A's and Company B's books?
Tags: Equity, method