Under the Equity Method of Accounting for Long-Term Investments in Common

question 43

Multiple Choice

Under the equity method of accounting for long-term investments in common stock when a dividend is received from the investee company

• A) the Dividend Revenue account is credited.
• B) the Stock Investments account is increased.
• C) the Stock Investments account is decreased.
• D) no entry is necessary.

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Definitions:

Certified

Official recognition or guarantee that an individual, organization, product, or document meets certain predefined standards.

Primarily Liable

Refers to the party who has the main responsibility to fulfill an obligation or debt in a legal agreement.

Secondarily Liable

Refers to the responsibility that falls on a party only after the primarily liable party has failed to fulfill their obligations.

Accommodation Maker

An individual who signs a loan document as a guarantor without receiving any of the loan proceeds, promising to pay the debt if the principal borrower fails to do so.