[Topsya]

Hi guys! I would really appreciate if you could help me with the following question:

Pride, Inc. owns 80% of Simba, Inc.’s outstanding common

stock. Simba, in turn, owns 10% of Pride’s outstanding

common stock. What percentage of the common stock cash

dividends declared by the individual companies should be

reported as dividends declared in the consolidated

financial statements?

The correct answer is 90% by Pride and 0% by Simba

Could anyone explain the way to solve it? Thanks A LOT!!!!

AUD - 90
FAR - 83
BEC - 81
REG - 80
ETHICS - 100

[Topsya]

pleeeaseee…. anyone?

AUD - 90
FAR - 83
BEC - 81
REG - 80
ETHICS - 100

[jsmithsae]

Pride (the parent) owns 80% of Simba (the sub), and Simba owns 10% of Pride.

When Pride declares a cash dividend, 90% of it is distributed to outside parties and 10% goes to

Simba. Because Simba is part of the consolidated entity, its 10% share is eliminated; thus, only

90% of dividends declared by Pride are reported in the consolidated statements. When Simba

declares a dividend, 80% is distributed to Pride and 20% to outside parties. Pride's 80% share is

eliminated as an intercompany transaction and the remaining 20% is also excluded because, from

the parent's point of view, subsidiary dividends do not represent dividends of the consolidated entity

and must be eliminated.

BEC-75!
AUD-84!
REG-78!
FAR-83!
Ethics-Passed!
Experience-Got that too

Used Becker 2013 Self-Study & NINJA 10pt Combo Lite(AUD)

[Author]

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