If the equity method is used to account for stock investments, the investor company decreases the investment account when it receives a cash dividend from the investee company.

Question

Quizplus · Accepted Answer

This is true. Under the equity method, the investor company records its share of the investee's earnings as an increase in the investment account, and decreases the investment account when it receives cash dividends from the investee.

If the Equity Method Is Used to Account for Stock