Information pertaining to dividends from Wray Corp.'s common stock investments for the year ending December 31, 20X1, follows:
On September 8, 20X1, Wray received a $50,000 cash dividend from Seco, Inc., in which Wray owns a 30% interest. A majority of Wray's directors are also directors of Seco.
On October 15, 20X1, Wray received a $6,000 liquidating dividend from King Co. Wray owns a 5% interest in King Co.
Wray owns a 2% interest in Bow Corp., which declared a $200,000 cash dividend on November 27, 20X1, to stockholders of record on December 15, 20X1, payable on January 5, 20X2.
What amount should Wray report as dividend income in its income statement for the year ending December 31, 20X1?
A.
$60,000
B.
$56,000
C.
$10,000
D.
$4,000
So, I want to know if my thought process is correct for question when I am reading it. Question asks for dividend income and dividends are only income they are declared (in this example it will be 200,000 x 2% = $4000) using cost method. Right? The dividends received from Serco will be assessed using equity method and liquidating dividends are not income.
FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016
Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein
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