If an investor company made the following entry to record receipt of a cash dividend, $\begin{array} { l }
\text {Cash}&10,000\
& \text {Dividend Revenue }&10,000\
\end{array}$

Which accounting method must the investor company be using?

Question

If an investor company made the following entry to record receipt of a cash dividend, $\begin{array} { l  }
 \text {Cash}&10,000\
& \text {Dividend Revenue }&10,000\
\end{array}$

Which accounting method must the investor company be using?

Quizplus · Accepted Answer

The cost method is used when an investor has insignificant influence over the investee, typically indicated by owning less than 20% of the company's stock. Recording dividends directly as revenue is characteristic of the cost method, as the investment's value isn't adjusted based on the investee's performance but rather through dividends received.

If an Investor Company Made the Following Entry to Record Cash10,000Dividend Revenue 10,000\begin{array} { l } \text {Cash}&10,000\\& \text {Dividend Revenue }&10,000\\\end{array}Cash​10,000Dividend Revenue ​10,000​

If an Investor Company Made the Following Entry to Record $\begin{array} { l } \text {Cash}&10,000\\& \text {Dividend Revenue }&10,000\\\end{array}$