In the case of an investment in equity securities where the investor does not have significant influence and the investment is carried at fair value,a dividend from the investee is:
A)A reduction of the carrying amount of the investment.
B)Income to the investor in the period of declaration.
C)An expense to the investor in the period of declaration.
D)A direct increase to retained earnings of the investor to offset the direct decrease to retained earnings of the investee.

Question

Quizplus · Accepted Answer

Since the investment is carried at fair value, any dividend declared by the investee is recognized as income to the investor in the period of declaration. Dividends are not a reduction of the carrying amount of the investment or an expense to the investor. Dividends also do not directly affect the retained earnings of the investor or the investee.

In the Case of an Investment in Equity Securities Where