Under the Equity Method of Accounting for Long-Term Investments in Common

question 53

Multiple Choice

Under the equity method of accounting for long-term investments in common stock, when a cash dividend is received from the investee company:

• A) the investor's Investment account is increased.
• B) the Dividend Revenue account is increased.
• C) the investor's Investment account is decreased.
• D) no entry is necessary.

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Definitions:

Asset Management

The method of creating, running, upkeeping, and marketing assets in an economical way.

Profitability

A measure of how effectively a company generates profit from its revenues, indicating the financial success and health of a business.

Liquidity

Refers to the ease with which assets can be converted into cash without significant loss of value.

Asset Management

The systematic process of developing, operating, maintaining, and selling assets in a cost-effective manner.