Question

Dividends received on an​ equity-method investment A. decrease the investment account. B. increase the investment account....

Dividends received on an​ equity-method investment

A.

decrease the investment account.

B.

increase the investment account.

C.

increase dividend revenue.

D.

increase​ stockholders' equity.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The equity method is an accounting technique used by a company to record the profits earned through its investment in another company. With the equity method of accounting, the investor company reports the revenue earned by the other company on its income statement, in an amount proportional to the percentage of its equity investment in the other company.

the investor will report its proportionate share of the investee’s equity as an investment (at cost). Profit and loss from the investee increase the investment account by an amount proportionate to the investor’s shares in the investee. This is known as the “equity pick-up.” Dividends paid out by the investee are deducted from this account.

Answer : Increase the investment account.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
. Fill in the dollar changes (amount of increase or decrease) caused in the Investment account...
. Fill in the dollar changes (amount of increase or decrease) caused in the Investment account and Dividend Revenue or Investment Income (Revenue) account by each of the following transactions, assuming the Sun Company uses (a) the fair value method and (b) the equity method for accounting for its investment in the Moon Company. (40 pts) (a)Fair Value method                    (b) Equity Method   Investment         Dividend            Investment       Dividend    Account              Revenue           Account             Revenue Transaction_________________________________________________________________________ 1) At the beginning of Year 1, Sun...
Explain the rationale for the equity method recording dividends received as a reduction in the investment...
Explain the rationale for the equity method recording dividends received as a reduction in the investment account and not as dividend income.
Under the equity method, dividends received by the investor from the investee will decrease the investment’s...
Under the equity method, dividends received by the investor from the investee will decrease the investment’s carrying amount. That is, we credit "Equity investments." Why don't we credit "Dividend Revenue?"
A parent company uses the partial equity method to account for an investment in common stock...
A parent company uses the partial equity method to account for an investment in common stock of its subsidiary. A portion of the dividends received this year were in excess of the parent company’s share of the subsidiary’s earnings subsequent to the date of the investment. The amount of dividend income that should be reported in the parent company’s separate income statement should be Select one: a. the portion of the dividends received this year that were NOT in excess...
7. An increase in the retention ratio will: A. increase the dividends per share. B. decrease...
7. An increase in the retention ratio will: A. increase the dividends per share. B. decrease a firm's sustainable rate of growth. C. decrease the equity of a firm. D. increase the dividend growth rate. E. increase the value of a firm's stock. 8. Hypo Tech expects its net income to grow at 20 percent a year for the next two years and then taper off to a constant 5 percent annual rate of growth. The firm maintains a constant...
1. In​ 2017, Gigajoule Corporation used the equity method to account for a​ 25% ownership interest...
1. In​ 2017, Gigajoule Corporation used the equity method to account for a​ 25% ownership interest in Megawatt Corporation. If Megawatt Corporation reports​ $400,000 of income and pays​ $80,000 of dividends in​ 2017, the net effect of the entries made by Gigajoule Corporation in 2017 will be​ to: A. reduce the Investment account by​ $320,000 B. increase the Investment account by​ $320,000 C. reduce the Investment account by​ $80,000 D. increase the Investment account by​ $80,000 2. Investments at fair...
10)Pace Company owns 80% of the common stock of Speed Co. and uses the equity method...
10)Pace Company owns 80% of the common stock of Speed Co. and uses the equity method to account for the investment. During 2017, Speed reported income of $250,000 and paid dividends of $80,000. There is no amortization associated with the investment. During 2017, how will Pace’s investment account change related to this investment? A. $136,000 increase. B. $200,000 increase. C. $0 change. D. $136,000 decrease. E. $200,000 decrease.
Equity Method for Stock Investment with Loss On January 6, Year 1, Bulldog Co. purchased 28%...
Equity Method for Stock Investment with Loss On January 6, Year 1, Bulldog Co. purchased 28% of the outstanding stock of Gator Co. for $172,000. Gator Co. paid total dividends of $20,600 to all shareholders on June 30. Gator Co. had a net loss of $32,700 Year 1. a. Journalize Bulldog's purchase of the stock, receipt of the dividends, and the adjusting entry for the equity loss in Gator Co. stock. Jan. 6 - Purchase June 30 - Dividend Dec....
under the equity method, if net loss reported by investee, what is the effect on investor's...
under the equity method, if net loss reported by investee, what is the effect on investor's Account? a. Record assets and increase in investment account b. Record income from investment and increase investment account c. Record asset ( cash or Receivable ) and decrease in investment d. Record loss from investment and increase investment account
Dahal Corp. holds a 12% equity interest in Garbarini Access, Inc. Nguyen Holdings Corp. holds 40%...
Dahal Corp. holds a 12% equity interest in Garbarini Access, Inc. Nguyen Holdings Corp. holds 40% of Garbarini Access shares. On April 1, 2011, Garbarini declares and distibutes a cash dividend to its stockholders that is a result of current earnings. How will the receipt of those dividends affect each company's balance sheet account: Equity Investment Garbarini Access, Inc. Dahal Corp Nguyen Holdings a)No effect Decrease b)Increase   Decrease c)No effect No effect d)Decrease Increase
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT