Foster Corporation uses the equity method to account for its 25% investment in Vector Corporation and receives $25,000 in dividends. How should Foster account for these dividends?

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 on the investor's books. Therefore, the $25,000 in dividends received by Foster Corporation would be accounted for as a decrease in the investment in Vector Corporation.

Foster Corporation Uses the Equity Method to Account for Its