Final answer:
The correct answer is D. None of the provided options increase the investment account under the equity method of accounting. Dividends decrease the investment's carrying amount, and market price decreases or losses do not result in an increase.
Step-by-step explanation:
The question is asking which scenario increases the investment account under the equity method of accounting. Under the equity method of accounting, an investor recognizes income based on its share of an investee's profit and increases in its investment's carrying amount.
However, none of the options given, such as decreases in the market price of the investee's stock, dividends that were declared in the previous year, or a net loss of the investee, would lead to an increase in the investment account. Therefore, the correct answer is D. None of the above is correct.
Dividends received from the investee actually reduce the carrying amount of the investment, rather than increasing it. This is because dividends are considered a return on investment. Therefore, when a dividend is received, it's assumed that part of the value of the initial investment has been returned to the investor.
Regarding the decrease in the market price or a net loss, these would decrease the value of the investment, not increase it. Therefore, they also do not lead to an increase in the investment account under the equity method.