When the equity method of accounting for investments is used by the investor,the Investments account increases when:

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When the equity method of accounting is used, the investor records its share of the investee's net income as an increase in the Investments account. Therefore, the Investments account increases when the investee reports net income for the year. Dividends received from the investee would decrease the Investments account. Additional depreciation related to the investment would affect the investor's own depreciation expense, not the Investments account. The investee reporting a net loss for the year would decrease the Investments account.

When the Equity Method of Accounting for Investments Is Used