If an investor company owns 35% of the common stock of another business, income received from the investee company are generally recorded by the investor company by:

Question

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The income received from the investee company is recorded as revenue in the investor company's financial statements. The investor company uses the equity method to account for its investment in the investee company. Under this method, the investor company records its share of the investee company's income in the Investment account. Therefore, the income received from the investee company is recorded by increasing the investor's Investment account (choice B).

If an Investor Company Owns 35% of the Common Stock