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Hi, I’m confused with this question, according to wiley textbook, the non controlling interest is likewise not included in consolidated dividends declared because, from the parent company’s point of view, subsidiary dividends do not represent dividends of the consolidated entity.
Please advise!! thank you!!!!
Jane Co. owns 90% of the common stock of Dun Corp. and 100% of the common stock of Beech Corp. On December 30, Dun and Beech each declared a cash dividend of $100,000 for the current year. What is the total amount of dividends that should be reported in the December 31 consolidated financial statements of Jane and its subsidiaries, Dun and Beech?
A. $10,000
B. $100,000
C. $190,000
D. $200,000Explanation
The correct answer is A. When preparing consolidated financial statement of a parent and its subsidiaries, eliminate all intercompany transactions. Since Jane owns 100% of the common stock of Beech, eliminate 100% of the dividends paid by Beech to Jane. Therefore, no dividends were paid to outsiders.Since Jane owns 90% of Dunn. When Dunn paid $100,000 of dividends to its shareholders, 90% of those dividends paid by Dunn to Jane would have to be eliminated. The remaining 10% of the dividends paid by Dunn to outsiders is not eliminated, so 10% of the $100,000, which equals $10,000, should be the total amount of dividends that should be reported in the December 31 consolidated financial statements of Jane and its subsidiaries, Dun and Beech.
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