If an investment is accounted for by using the equity method, a stock dividend received on the investment will:

Question

Quizplus · Accepted Answer

A stock dividend received on an investment accounted for by using the equity method will have no effect on the investment account or the investment revenue account. This is because the equity method only records changes in the investee's earnings, not changes in the investee's capital structure. A stock dividend does not change the earnings of the investee, so it has no impact on the equity method accounting for the investment.

If an Investment Is Accounted for by Using the Equity