Bitter Corporation accounts for its investment in the common shares of Young Company under the equity method.Bitter Corporation should ordinarily record a cash dividend received from Young as

Question

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Under the equity method, dividends received from the investee are recorded as a reduction in the carrying value of the investment, not as income. This is because the investor's share of the investee's earnings is already recognized in the investor's income.

Bitter Corporation Accounts for Its Investment in the Common Shares