When Using the Equity Method to Account for an Investment,cash

question 5

Multiple Choice

When using the equity method to account for an investment,cash dividends received by the investor from the investee should be recorded:

• A)As a reduction in the Investments account.
• B)As an increase in the Investments account.
• C)As dividend income.
• D)As a contra item to stockholders' equity.

---

Definitions:

Federal Insurance Contributions Act

A U.S. law that mandates a payroll tax on the paychecks of employees, as well as contributions from employers, to fund the Social Security and Medicare programs.

Cumulative Gross Earnings

The total gross income earned by an individual or entity before any deductions over a given period.

State Tax Rate

The percentage at which individuals or businesses within a state are taxed by the state government.

FICA

The Federal Insurance Contributions Act; a U.S. law that requires a deduction from paychecks to fund Social Security and Medicare benefits.