Asked by Hailey Mosley on May 09, 2024
Verified
Under the equity method of accounting for investments in common shares, when a dividend is received from the investee,
A) the Dividend Income account is credited.
B) the Investment account is increased.
C) the Investment account is decreased.
D) no entry is necessary.
Dividend Income
Income received by shareholders from the profits distributed by a company, usually in the form of cash payments.
- Recognize how dividends and net income or loss from investees are handled under the equity method.
Verified Answer
AS
Angela SharmaMay 16, 2024
Final Answer :
C
Explanation :
Under the equity method, dividends received from the investee are considered a return on investment and thus reduce the carrying amount of the investment. Therefore, the Investment account is decreased.
Learning Objectives
- Recognize how dividends and net income or loss from investees are handled under the equity method.
Related questions
An Investor Who Is Using the Equity Method Records Dividends ...
Under the Equity Method, the Investment in Associates Account Is ...
The Equity Method of Accounting for Investments Requires ...
Zach Company Owns 45% of the Voting Stock of Tomas ...
Under the Equity Method, Dividends Received by the Investor Should ...