Question

Plack Co. purchased 10,000 shares (2% ownership) of Ty Corp. on February 14, 2001. Plack received a stock dividend of 2,000 shares on April 30, 2001, when the market value per share was $35. Ty paid a cash dividend of $2 per share on December 15, 2001. In its 2001 income statement, what amount should Plack report as dividend income?

Answer 1

Answer: Dividend Income = $24000

Explanation:

Given:

Shares purchased = 10000

Received a stock dividend of 2,000 shares

Market value per share = $35

Cash dividend of $2 per share

It should be duly noted that acknowledgement of a stock dividend is not revenue. It increases the number of shares held and folds the cost ground per share.

∴ Dividend Income = No. of shares × dividend per share

Dividend Income = 12000 × $2

Dividend Income = $24000