6. In the case of an investment in equity securities where the investor does not have significant influence and the investment is carried at fair value, a dividend from the investee is: a. A reduction of the carrying amount of the investment. b. Income to the investor in the period of declaration. c. An expense to the investor in the period of declaration. d. A direct increase to retained earnings of the investor to offset the direct decrease to retained earnings of the investee.

Question

Alfonso Livingston

Business

19 August, 16:56

6. In the case of an investment in equity securities where the investor does not have significant influence and the investment is carried at fair value, a dividend from the investee is: a. A reduction of the carrying amount of the investment. b. Income to the investor in the period of declaration. c. An expense to the investor in the period of declaration. d. A direct increase to retained earnings of the investor to offset the direct decrease to retained earnings of the investee.

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Deacon · Answer 1

b. Income to the investor in the period of declaration.

Explanation:

The dividend received will be a income for investors because the dividend received is the return on securities. It will not be deducted from the equity balance neither it is an expense for investors. A direct increase in retained earning to settles the previous losses is the fair value adjustment.