If the Equity Method Is Used to Account for a Long-Term

question 148

Multiple Choice

If the equity method is used to account for a long-term investment in common stock,cash dividends received from the investee are recorded by the investor as:

• A)a debit to Equity-Method Investment and a credit to Equity-Method Investment Revenue.
• B)a debit to Cash and a credit to Dividend Revenue.
• C)a debit to Dividend Receivable and a credit to Dividend Revenue.
• D)a debit to Cash and a credit to Equity-Method Investment

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Definitions:

American Law Institute (ALI) Rule

A guideline used in the legal system that includes considerations of mental illness in the determination of criminal responsibility.

Insanity Defense

A legal defense asserting that a defendant was unable to understand the nature of their actions or distinguish right from wrong due to mental illness.

American Law Institute (ALI) Rule

A legal standard used to determine insanity which includes the inability to understand the criminality of one's actions or to conform one's actions to the law due to a mental defect or disease.

M'Naghten Rule

A legal standard used to determine whether a defendant was insane at the time of committing a crime and therefore not responsible for their actions.