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

question 37

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.

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Definitions:

Effects On Other Parts

The impact that changes or actions in one segment or component have on other segments or components within a system or organization.

Proceeds From Sales

The total amount of money received by a company from selling goods, services, or assets.

Opportunity Costs

The cost of foregoing the next best alternative when making a decision. It represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Fixed Costs

Expenses that do not change with the level of goods or services produced over the short term.