Which of the following statements about the equity method is NOT true?
A) The investment asset is valued at cost on acquisition.
B) The investment asset is increased for the investing company's share of the investee company's profit.
C) When the investee company pays a dividend, the investing company credits dividend revenue.
D) The investment asset is decreased for the investing company's share of the investee company's loss.

Question

Quizplus · Accepted Answer

Under the equity method, when the investee company pays a dividend, the investing company reduces the carrying amount of the investment asset by the amount of the dividend received, rather than crediting dividend revenue. This reflects the investor's share of the investee's distributed profits, not revenue from the investment.

Which of the Following Statements About the Equity Method Is