JayBird Jewelers purchased 3,000,000 of the outstanding 10,000,000 shares of Angel & Associates.JayBird has significant influence over Angel,so JayBird will account for this investment using the equity method.Angel declared dividends of $275,000 during the year.How will JayBird record this transaction?

Question

Quizplus · Accepted Answer

Under the equity method, dividends received are recorded as a reduction in the investment account, not as dividend revenue. JayBird owns 30% of Angel (3,000,000/10,000,000), so it will reduce the investment account by 30% of $275,000, which is $82,500.

JayBird Jewelers Purchased 3,000,000 of the Outstanding 10,000,000 Shares of Angel