Blanton Corporation purchased 35% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives from Worton Corporation?

Question

Quizplus · Accepted Answer

When a company owns 20% to 50% of another company's stock, it typically uses the equity method. Under this method, dividends received are recorded as a reduction in the investment account, not as dividend revenue.

Blanton Corporation Purchased 35% of the Outstanding Shares of Common