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 dividend revenue at the market value of the stock

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

As a reduction in the total cost of DEF stock owned

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

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