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At the start of the current year, Violet Company held 30% of ABC Company's 150,000 outstanding shares and 2% of DEF Company's 500,000 outstanding shares
At the start of the current year, Violet Company held 30% of ABC Company's 150,000 outstanding shares and 2% of DEF Company's 500,000 outstanding shares. During the year, Violet received a P25,000 cash dividend from ABC and a 5% share dividend when the stock of ABC was selling at P40 per share. DEF declared a P15 per share dividend during the year but subsequently issued 500 shares to Violet in lieu of the cash dividends. At the end of the year, Violet received P50,000 as liquidating dividends from DEF Company. How much will Violet report as dividend income for the current year?
Expert Solution
Dividend income for the current year = 32,500
Step-by-step explanation
| Cash Dividend from ABC | 25,000 |
| Share Dividend in lieu of cash (15 x 500) | 7,500 |
| Dividend Income | 32,500 |
Only cash dividends and Share dividends in lieu of cash dividends are reported as dividend income.
Stock dividends represent a reallocation of part of a company's retained earnings to the common stock and additional paid-in capital accounts.
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