Under the Equity Method of Accounting for a Stock Investment

question 46

True/False

Under the equity method of accounting for a stock investment, cash dividends received are considered a reduction of the investee's net assets.

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Definitions:

Punitive Damages

Monetary compensation awarded to a plaintiff that goes beyond what is necessary to compensate for losses and is intended to punish the defendant for egregious behavior.

Compensate

To compensate means to provide something, typically money, in recognition of loss, suffering, or damage incurred; a form of recompense.

Foreseeability

A legal principle referring to the predictability or anticipation of risks at the time of a contractual agreement.

Proximate Cause

Legal cause; exists when the connection between an act and an injury is strong enough to justify imposing liability.