Receipt of dividends from the investee company affects the investor company's long-term investment account under which method?

Question

Quizplus · Accepted Answer

Under the equity method, dividends received from the investee company are recognized as a reduction of the carrying value of the investment in the investor company's long-term investment account. This is because the investor company is deemed to have a significant influence over the investee company and therefore the dividends received represent a return on the investment.

Receipt of Dividends from the Investee Company Affects the Investor