When the equity method of accounting for investments is used by the investor,the Investments account increases when:
A)A cash dividend is received from the investee.
B)The investee reports a net income for the year.
C)The investor records additional depreciation related to the investment.
D)The investee reports a net loss for the year.

Question

Quizplus · Accepted Answer

When the equity method is used, the investor records its share of the investee's net income as an increase in the Investments account. A cash dividend received from the investee would reduce the Investment account, and additional depreciation recorded by the investor would not affect the Investments account. A net loss reported by the investee would also reduce the Investments account.

When the Equity Method of Accounting for Investments Is Used