Why does the equity method record dividends received from an investee as a reduction in the investment account, not as dividend income?
Answer to relevant QuestionsJones Company possesses a 25 percent interest in the outstanding voting shares of Sandridge Company. Under what circumstances might Jones decide that the equity method would not be appropriate to account for this investment?Wilson Company acquired 40 percent of Andrews Company at a bargain price because of losses expected to result from Andrews's failure in marketing several new products. Wilson paid only $100,000, although Andrews's ...In January 2010, Wilkinson, Inc., acquired 20 percent of the outstanding common stock of Bremm, Inc., for $700,000. This investment gave Wilkinson the ability to exercise significant influence over Bremm. Bremm’s assets on ...Waters, Inc., acquired 10 percent of Denton Corporation on January 1, 2010, for $210,000 although Denton’s book value on that date was $1,700,000. Denton held land that was undervalued by $100,000 on its accounting ...Smith purchased 5 percent of Barker’s outstanding stock on October 1, 2009, for $7,475 and acquired an additional 10 percent of Barker for $14,900 on July 1, 2010. Both of these purchases were accounted for as ...
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