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标题: Financial Reporting: Equity Method conceptual troubles [打印本页]

作者: chunty 时间: 2011-7-11 19:50 标题: Financial Reporting: Equity Method conceptual troubles

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 ?

作者: defour44 时间: 2011-7-11 19:50

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.

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