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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

How does the accounting for a dividend received differ between the cost method and the equity method?

To determine

Equity investment: Equity investments are stock instruments which claim ownership in the investee company and pay a dividend revenue to the investor company.

Cost method: Cost method is the accounting method used for accounting equity investments which claim less than 20% of the outstanding stock of the investee company.

Equity method: Equity method is the accounting method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.

To indicate: The differences between accounting for dividend revenue under cost method and equity method

Explanation

Dividend revenue is recorded as revenue and reported on the income statement of the investor company, under cost method...

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