Under the Equity Method of Accounting for Investments in Common

question 19

Multiple Choice

Under the equity method of accounting for investments in common shares, when a dividend is received from the investee,

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

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Definitions:

Compensating Differentials

Wage differentials that compensate workers for the job attributes, such as difficulty level or undesirable conditions, indicating the premium required to attract workers to these positions.

Marginal Productivity Theory

A principle that describes how the addition of a unit of labor or capital increases output, holding other factors constant.

Unequal Distribution

A situation where resources, wealth, or opportunities are not evenly shared among members of a society.

Median Earnings

The midpoint of income distribution, meaning that half of the workers earn more than this amount and half earn less.