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

Question

Quizplus · Accepted Answer

Under the cost method, cash dividends received from the investee are recorded as dividend income by the investor. This method is used when the investor does not have significant influence over the investee, typically indicated by ownership of less than 20% of the voting stock.

When an Investor Uses the Cost Method to Account for Investments