Under the equity method the investor records dividends received by crediting

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Under the equity method, dividends received from the investee reduce the carrying amount of the investment on the investor's books. Therefore, when dividends are received, the investor credits (decreases) the "Stock Investments" account, rather than recognizing dividend income. This approach reflects the investor's share of the investee's earnings that have already been recognized in the investor's income, and the dividends are considered a return of investment rather than income.

Under the Equity Method the Investor Records Dividends Received by Crediting