Under the Equity Method, the Dividend Revenue from a Long-Term

question 25

Multiple Choice

Under the equity method, the dividend revenue from a long-term investment-which has an ownership of 20% to 50%-the dividend is treated as a:

• A)debit to revenue from investments.
• B)dividend revenue.
• C)return of capital.
• D)credit to current assets.

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Definitions:

Double Entry Accounting

An accounting system that maintains the balance of the accounting equation (Assets = Liabilities + Equity) by recording each transaction twice, once as a debit and once as a credit.

Single Entry Accounting

A method of bookkeeping that records only one side of each financial transaction, typically sufficient for smaller, simpler businesses.

Gross Profit

The difference between sales revenue and the cost of goods sold before accounting for other expenses.

Markup

The amount added to the cost of goods to cover overhead and profit, usually expressed as a percentage of the cost.