When an Investor Owns 35% of the Stock of Another

question 28

True/False

When an investor owns 35% of the stock of another business,cash dividends received from the investee company are recorded by decreasing the Equity-Method Investment account.

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Definitions:

Dividends

Payments made by a corporation to its shareholder members from the company's earnings.

Equity

The value of an owner's interest in a property or business, after all debts associated with that property or business are paid off.

EBIT

EBIT, which stands for Earnings Before Interest and Taxes, calculates a company's earnings without considering income tax and interest expenses.

Ending Equity

The value remaining for shareholders after subtracting liabilities from assets, evaluated at the end of an accounting period.