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

Under the equity method, cash dividends received by the investor from the investee are considered a return on investment and thus reduce the carrying amount of the investment on the investor's books. This is because the investor's share of the investee's profits, which increase the investment account, already includes the investor's share of those dividends.

When an Investor Uses the Equity Method to Account for Investments