If the C-Corp invests in the equity bonds of an additional business, how is which investment accounted for? If the invested equity pays the dividend, is it deliberate distinction immediately, even if the worth of the invested equity has declined?
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Tagged as: accounted, Business, Investments
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There is no profit/loss calculated on an investment, until it is sold.
An investment can go up or down, but money hasn’t changed hands, so no profit or loss has actually occurred until the time of sale.
It depends on how of the investee you own. If you own less than 20% and you receive a dividend, your entry:
Dr Cash xxx
Cr Dividend income xxx
If you own between 20% and 50% of the investee, that makes it an associated company and you need to equity account for the investment. When you receive a dividend, you
Dr Cash xxx
Cr Investment in associated company xxx
Pls also refer to the attached notes.