Jarrett Corporation uses the equity method to account for its 25% investment in Polo Corporation and receives $15,000 in dividends. How should Jarrett account for these dividends?

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 on the investor's books. Therefore, the $15,000 in dividends received by Jarrett Corporation would be accounted for as a decrease in the investment in Polo Corporation.

Jarrett Corporation Uses the Equity Method to Account for Its