An investor holds 1% of the outstanding stock of an investee.The investor plans to hold the stock for a long time.The investor reports the dividends received from the stock as ________.
A) an increase in the investment account
B) a decrease in the investment account
C) dividend revenue on the income statement
D) equity in earnings of the investee on the income statement

Question

Quizplus · Accepted Answer

Since the investor holds less than 20% of the outstanding stock, the investor is not considered to have significant influence over the investee. Therefore, the equity method of accounting is not used. Instead, dividends received from the investee are reported as dividend revenue on the income statement.

An Investor Holds 1% of the Outstanding Stock of an Investee.The