Graham Corporation accounts for its investment in the common stock of Luke Company under the equity method.Graham Corporation should ordinarily record a cash dividend received from Luke as
A) a reduction of the carrying value of the investment.
B) additional paid-in capital.
C) an addition to the carrying value of the investment.
D) dividend income.

Question

Quizplus · Accepted Answer

Under the equity method, dividends received from the investee are recorded as a reduction in the carrying value of the investment, not as dividend income.

Graham Corporation Accounts for Its Investment in the Common Stock