A parent company received dividends in excess of the parent company's share of the subsidiary's earnings subsequent to the date of the investment. How will the parent company's investment account be affected by those dividends under each of the following accounting methods?

Question

Quizplus · Accepted Answer

Under the Cost Method, dividends received in excess of the parent's share of the subsidiary's earnings reduce the investment account. Similarly, under the Partial Equity Method, such excess dividends also decrease the investment account as they are considered a return of capital.

A Parent Company Received Dividends in Excess of the Parent