Mistaken idea “Equity-method income equals dividends received”

Equity-method income follows the investor's adjusted share of investee earnings or losses. Dividends are distributions of value already reflected in the investment accounting and generally reduce the investment's carrying amount.

Suppose an investor owns 30 percent of an investee that reports $300,000 of income and pays $100,000 of dividends. Before basis adjustments, the investor's income share is $90,000. Its $30,000 cash dividend reduces the investment. A learner who records only $30,000 of dividend income omits the investee result and counts the distribution in the wrong place. Correct the work with separate income, basis-difference, dividend, OCI, and carrying-amount rows.