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:

Non-Exclusive Possession

A legal arrangement where property or an asset can be used or occupied by more than one party simultaneously.

Involuntary Bailment

A situation where an individual unintentionally becomes responsible for the custody or care of another's property, without an agreement.

Briefcase

A flat, rectangular container, typically made of leather, used for carrying books, documents, and other items.

Office

A room or set of rooms where business, professional, or administrative work is conducted.