So I am getting confused here: We do not take Dividends in Equity method in Income statements, right? Will anything be reported in Income statement? I guess percentage ownership of profit. Please confirm. Balance sheet will be look like Investments + NI - Div, right? In Cost method, we just take ownership percentage * Profit in Income statement, right? Do we add dividends in Income statement for Cost or Market method? What happens to balance sheet.
A. right. prorata share of income is reported on the income statement B. right. balance sheet will have an investment account: prorata share of net income increase this account (unless there is a loss), div increase cash, decrease the investment (return of capital) C. In cost method, it depends on how you classify the securities. (held to mat, trading or available for sale.) if trading, unrealized gains affect the income statement. if available for sale, goes to cta on balance sheet, skips the income statement.) held to marturity, skips income statement. Dividends hit the income statement in all cases. please someone confirm, i’m not looking at notes.
cfasf1 Wrote: ------------------------------------------------------- > A. right. prorata share of income is reported on > the income statement > B. right. balance sheet will have an investment > account: prorata share of net income increase this > account (unless there is a loss), div increase > cash, decrease the investment (return of capital) Dividend decrease the cash, right. It doesnt increase in balance sheet. Suppose 120 Investments + 9 prop profit and -3 dividends = 123 > C. In cost method, it depends on how you classify > the securities. (held to mat, trading or available > for sale.) if trading, unrealized gains affect > the income statement. if available for sale, goes > to cta on balance sheet, skips the income > statement.) held to marturity, skips income > statement. Dividends hit the income statement in > all cases. > > please someone confirm, i’m not looking at notes.
cfaboston28 Wrote: ------------------------------------------------------- > cfasf1 Wrote: > -------------------------------------------------- > ----- > > A. right. prorata share of income is reported > on > > the income statement > > B. right. balance sheet will have an investment > > account: prorata share of net income increase > this > > account (unless there is a loss), div increase > > cash, decrease the investment (return of > capital) > > > Dividend decrease the cash, right. It doesnt > increase in balance sheet. Suppose 120 Investments > + 9 prop profit and -3 dividends = 123 > He is saying you actually recieve the cash from the dividend, but it does decrease the value of the company so you have to back it out of the invesment as you have outlined.