Homework Answers
Answer: Dividends received will reduce the investment account
Explanations:
Percentage of holding is 35%. It has significant impact. So, Sheehan & co. uses 'Cost method'.
in Cost method,
Dividends received will reduce the investment account
Thus,
A. Dividends received will increase the investment account is incorrect because it reduces the investment account
B. Dividends received will have no impact on the investment account. It will Realized Gain-Net income is incorrect because dividend received reduces the investment account
C. In Fair value method, Dividends received will have no impact on the investment account. It will increase cash and dividend revenue. So, it is incorrect
D. Dividends received will reduce the investment account
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