Final answer:
The equity method is an accounting method used for investments with significant influence, recognizing earnings and dividends separately.
Step-by-step explanation:
The equity method is an accounting method that is used to account for investments in which the investor has significant influence over the investee. Under the equity method, the investor recognizes its share of the investee's earnings as investment revenue on its own income statement. This recognition of investment revenue is not dependent on whether dividends are actually paid by the investee or received by the investor. Therefore, option a is not correct.
When dividends are paid by the investee, the investor recognizes the dividend income as a reduction in the carrying value of its investment. This does not increase the investee's net assets, as stated in option b. Therefore, option b is not correct.
The equity method does not view the dividend payment as returning assets to its investors in the form of a cash payment, as mentioned in option c. Instead, it recognizes the dividend income separately from the investee's earnings, as explained in the earlier paragraph. Therefore, option c is not correct.
Finally, the equity method does not count the payment of dividends twice. It recognizes the dividends as a reduction in the investment value once, and the investee's earnings separately as investment revenue. Therefore, option d is not correct.
Based on the above explanations, none of the given options correctly describe the equity method.