Question

Sells Company accounts for its investment in OFO, Inc. under the available-for-sale method. How should Sells Company record a cash dividend received from OFO

Answer 1

the journal entry should be:

Dr Cash X

Cr Dividend revenue X

When a company holds securities as an investment and classifies them as available for sale (AFS), any dividends received will be recorded as revenue.

Dividend revenue is reported in the income statement.