medium · Financial Accounting statement-of-cash-flows
A firm using the equity method to account for a 30% investment in an associate receives a cash dividend.
In the investor's Statement of Cash Flows (indirect method), how is this transaction typically handled in the reconciliation of net income to cash flow from operations?
- The dividend is added back to net income as a cash inflow from the investment.
- The dividend is subtracted from net income as a non-cash distribution.
- The dividend is reported as a cash inflow in the investing activities section.
- No adjustment is made as the dividend has no effect on net income.
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