Question

If the cost method is used to account for a long-term investment in common stock, dividends received should be Select one: a. debited to the Stock Investments account. b. credited to the Dividend Revenue account. c. credited to the Stock Investments account. d. debited to the Dividend Revenue account. e. recorded only when 20% or more of the stock is owned.

Answer 1

b. dividend will be credited to dividend revenue account

Step-by-step explanation:

Dividend is the fixed amount which is distributed equity shareholder and preference shareholder based on their ownership interest in the company.

According to the cost method dividend will be credited to dividend revenue account because the investment account is recorded at cost value and thus it is shown in the balance sheet.