If an investor uses the equity method to account for a long-term equity investment,then the investor records income when the investee pays a dividend.

Question

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The equity method requires the investor to record its share of the investee's earnings as income, regardless of whether or not a dividend is paid. Dividends paid by the investee are accounted for separately as a reduction of the investment account balance.

If an Investor Uses the Equity Method to Account for a Long-Term