When using the equity method to account for an investment, cash dividends received by the investor from the investee should be recorded:
A) As a reduction in the investment account.
B) As an increase in the investment account.
C) As dividend income.
D) As a contra item to stockholders' equity.

Question

Quizplus · Accepted Answer

Under the equity method, cash dividends received by the investor from the investee are recorded as a reduction in the investment account, reflecting the receipt of assets distributed by the investee.

When Using the Equity Method to Account for an Investment