Allen Corporation Accounts for Its Investment in the Common Shares

question 71

Multiple Choice

Allen Corporation accounts for its investment in the common shares of Burns Company under the equity method. Allen Corporation should ordinarily record a cash dividend received from Young as

• A) an addition to the carrying value of the investment.
• B) dividend income.
• C) a reduction of the carrying value of the investment.
• D) contributed surplus.

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Definitions:

Logic

Logic is a systematic method of reasoning that involves the assessment of statements or propositions to deduce valid conclusions.

Rhetoric

The art of effective or persuasive speaking or writing, often used to influence or shape public opinion.

Intelligence

The ability to understand and solve problems; an important leadership trait or quality involving discernment, comprehension, and judgment; capacity to understand information, formulate strategies, and make good decisions.