Under the equity method of accounting for long-term investments in common stock when a dividend is received from the investee company
A) the Dividend Revenue account is credited.
B) the Stock Investments account is increased.
C) the Stock Investments account is decreased.
D) no entry is necessary.

Question

Quizplus · Accepted Answer

Under the equity method, dividends received from the investee are considered a return on investment and thus reduce the carrying amount of the investment. Therefore, the Stock Investments account is decreased.

Under the Equity Method of Accounting for Long-Term Investments in Common