Under the equity method the receipt of dividends from the investee company results in an increase in the Stock Investments account.

Question

Quizplus · Accepted Answer

Under the equity method, dividends received from the investee company are recorded as a reduction in the investor's investment in the investee, not as an increase. This is because the investor's share of the investee's earnings has already been recognized through the increased carrying value of the investment.

Under the Equity Method the Receipt of Dividends from the Investee