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.

Question

Quizplus · Accepted Answer

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.

Under the Equity Method of Accounting for Investments in Common