Test: CPA Financial Accounting and Reporting (FAR)

1.

ABC Company uses the equity method to account for its investment in DEF Co common stock. How should ABC record a 3% stock dividend received from DEF?

As a reduction in the total cost of DEF stock owned

As a memorandum entry reducing the unit cost of all DEF stock owned

As dividend revenue at DEF's carrying value of the stock

As dividend revenue at the market value of the stock

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