When an investor uses the equity method to account for investments in common stock, the investor's share of cash dividends from the investee should be recorded asA deduction from the investor's share of the investee's profits. A deduction from the investment account. A deduction from the stockholders' equity account, Dividends to Stockholders. Dividend income.

Question

Shirley Whitney

Business

20 April, 19:16

When an investor uses the equity method to account for investments in common stock, the investor's share of cash dividends from the investee should be recorded asA deduction from the investor's share of the investee's profits. A deduction from the investment account. A deduction from the stockholders' equity account, Dividends to Stockholders. Dividend income.

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Moses Sellers · Answer 1

The correct option is deduction from the investment account

Explanation:

In an equity method, the firm analyzes the profits which are earned by investing in other firms. The accounting is done in two ways:

1. Income from the investment is shown in the firm income statement

2. And, the value which is to be reported is shown in the firm balance sheet under the assets side

So, it won't be recorded as an investor profit, neither it would be recorded as a stockholder equity account as it is a separate account, nor it would be recorded as a dividend income.

Therefore, the correct option is a deduction from the investment account