Financial Reporting: Equity Method conceptual troubles conceptual, Investment, question

zbird2134

Alright, so in the Equity method:
Balance Sheet-
=
Cost of the Investment
+ Share in Earnings
- Share in the Dividends
Income Statement-
=
Share in the Earnings
My question is, to balance THE ACCOUNTING EQUATION ..Is the reduction in the Assets’ side of the Balance Sheet compensated by -
ADDING THE DIVIDENDS to the CASH BALANCE
or
by eliminating the DIVIDENDS from the Income Statement as well ?

JoeyDVivre

NO I/S elimination. WHen dividends are received, its an increase in cash and a decrease in the investment, no impact on total assets.
Journal Entry would be:
Dr Cash - $5
Cr Equity method investment - $5
To record dividends received from equity method investee.