In a Situation Where the Investor Exercises Significant Influence Over

question 33

Multiple Choice

In a situation where the investor exercises significant influence over the investee, which of the following entries is not actually posted to the books of the investor?
1) Debit to the Investment account, and a Credit to the Equity in Investee Income account.
2) Debit to Cash (for dividends received from the investee) , and a Credit to Dividend Revenue.
3) Debit to Cash (for dividends received from the investee) , and a Credit to the Investment account.

• A) Entries 1 and 2.
• B) Entries 2 and 3.
• C) Entry 1 only.
• D) Entry 2 only.
• E) Entry 3 only.

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Definitions:

Expense Accounts

Accounts used to record the consumption of economic benefits during the operational period, contributing to revenue generation.

Income Summary

An account used in the closing process that summarizes revenues and expenses for a period before transferring the balance to retained earnings.

Revenue Account

An account that tracks the income earned by a company from its normal business operations, excluding expenses.

Debit

The left side of an account.