When an investor uses the equity method to account for investments in common stock, cash dividends received by the investor from the investee should be recorded as

Question

Quizplus · Accepted Answer

When using the equity method, dividends received are recorded as a deduction from the investment account because they decrease the investor's share of the investee's retained earnings. This is in contrast to the treatment of dividends received under the cost method, which are recorded as dividend revenue.

When an Investor Uses the Equity Method to Account for Investments