137k views
5 votes
Koehn Corporation accounts for its investment in the ordinary shares of Sells Company under the equity method. Koehn Corporation should ordinarily record a cash dividend received from Sells as:_______.a. a reduction of the carrying value of the investmentb. share premiumc. an addition to the carrying value of the investmentd. dividend income

1 Answer

2 votes

Answer:

A) a reduction of the carrying value of the investment

Step-by-step explanation:

Under the equity method, the investor company cannot record dividends as revenue, it must record them as a reduction of the carrying value of their investment. Under the equity method, the value of the investment decreases with cash dividends. This transaction involves only a change between assets, investment decreases while cash increases, no additional revenue is recorded.

User Goji
by
7.9k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.