Under the equity method of accounting for long-term investments in common stock,when a cash dividend is received from the investee company:
A)the investor's Equity-method Investment account is increased.
B)the Dividend Revenue account is increased.
C)the investor's Equity-method Investment account is decreased.
D)no entry is necessary.

Question

Quizplus · Accepted Answer

Under the equity method, when a cash dividend is received from the investee company, the investor's Equity-method Investment account is decreased. This is because the dividend is considered a return on investment, reducing the carrying value of the investment on the investor's books.

Under the Equity Method of Accounting for Long-Term Investments in Common