Acme Company owns 35% of Superior Company.Superior Company paid $35,000 cash dividends for the year.Acme Company's journal entry to record the dividends includes a:

Question

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When using the equity method, dividends received from an investee are recorded as a reduction of the investment account. Therefore, the journal entry for Acme Company would include a credit to its Equity-Method Investments account for 35% of the dividends received by Superior Company ($35,000 x 35% = $12,250). The remaining balance of the dividends ($22,750) is not recognized in Acme's financial statements since it represents the portion of dividends received by Superior's other shareholders.

Acme Company Owns 35% of Superior Company