Cash Dividends Declared Out of Current Earnings Are Distributed to an Investor

question 46

Multiple Choice

Cash dividends declared out of current earnings are distributed to an investor. How will the investor's investment account be affected by those dividends under each of the following accounting methods? Fair Value Method      Equity Method

• A)Decrease                  No effect
• B) Decrease                  Decrease
• C) No effect            Decrease
• D) No effect            No effect

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Definitions:

Heated Disagreement

An intense argument or conflict between individuals or groups.

Dissociation

The process through which a member of a business entity severs their connection or association with that entity.

LLP

Refers to a Limited Liability Partnership, a business structure where partners have limited liabilities and the partnership has elements of both partnerships and corporations.

Liable

Legally responsible or obligated, particularly in the context of debts or legal judgements.