Chapter 13, Problem 4DQ

To determine

Equity investment:

Equity investments are stock instruments which claim ownership in the investee company and pay dividend revenue to the investor company.

Cost method:

Cost method is the accounting method used for accounting equity investments which claim less than 20% of the outstanding stock of the investee company.

Equity method:

Equity method is the accounting method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.

To indicate: The differences between accounting for dividend revenue under cost method and equity method