Equity Accounting Method

On the balance sheet we are supposed to record investment + % of net income - dividend or investment + % of retained earning - dividend?

If you investment in a company that has a 0 net income in the year you invest but has a carried forward retained earning, I think it makes sense to record investment + % of retained earning - dividend. Is this correct?

Dividends come out of retained earnings. You increase the Investment account by the change in retained earnings, or % net income - dividends.