Under the Equity Method of Accounting for Investments,dividends Paid by the Investee

question 102

Multiple Choice

Under the equity method of accounting for investments,dividends paid by the investee are recorded by the investor as:

• A) a credit to Dividend Revenue of the investor company
• B) a debit to the Investment account of the investor company
• C) a credit to the Investment account of the investor company
• D) no entry is made to record dividends in this accounting situation

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Definitions:

Cash Flows

The aggregate of cash inflows and outflows within a corporation, impacting its liquid assets.

Ordinary Annuity

A series of equal payments made at equal intervals over a period of time.

Compounding Periods

The frequency with which interest is added to the principal balance of an investment, affecting the total interest earned.

Future Value

The value of an investment or a sum of money projected to grow over a specified period of time, often calculated using the interest rate.