If the Cost Method Is Used to Account for a Long-Term

question 149

Multiple Choice

If the cost method is used to account for a long-term investment in common stock dividends received should be

• A) credited to the Stock Investments account.
• B) credited to the Dividend Revenue account.
• C) debited to the Stock Investments account.
• D) recorded only when 20% or more of the stock is owned.

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Definitions:

Income Statement

A report that outlines a company's financial results for a certain period, including income and expenditures, to reveal a net gain or deficit.

Balance Sheet

A report detailing a corporation's assets, liabilities, and the equity of its shareholders at a particular moment.

General Ledger

A comprehensive set of accounts that records all financial transactions of a business, serving as the primary source for preparing financial statements.

Income Statement Accounts

These include revenue, expense, gain, and loss accounts that summarize the financial performance of a company over a period of time.