If the equity method is being used, cash dividends received
A)are credited to the Dividend Income account.
B)do not require an entry because the investee's net income have already been recorded at the proper proportion on the investor's books.
C)are credited to the Investment in Associates account.
D)are credited to the Income from Associates account.

Question

Quizplus · Accepted Answer

Under the equity method, cash dividends received from the investee are considered a return on investment and thus reduce the carrying amount of the investment on the investor's books. Therefore, they are credited to the Investment in Associates account, reflecting a reduction in the value of the investment.

If the Equity Method Is Being Used, Cash Dividends Received