When an investor is using the equity method and receives dividends from the investee, the journal entry will include a
A) credit to Dividend Revenue.
B) credit to Retained Earnings.
C) credit to the Investment account.
D) debit to the Investment account.

Question

Quizplus · Accepted Answer

When using the equity method, dividends received from the investee are considered a return on investment and reduce the carrying amount of the investment. Therefore, the correct entry includes a credit to the Investment account.

When an Investor Is Using the Equity Method and Receives