Dividend issued by subsidiaries

Question: Company A owns 80% of company B. Company B declares a dividend of $1MM. Does A report 80% of 1MM in its income statement? Why? or Why not? Thanks for your help.

100%. Consolidation since threshhold ownership > 50%.

I’d say 0%.

Dreary explain…i must be missing something here.

Do we ever report dividends on I/S?

Dreary Wrote: ------------------------------------------------------- > Do we ever report dividends on I/S? held-for-trading & available-for-sale are

Yes, but for equity method only share of earnings gets recorded. For full consolidation, you combine revenues and expenses, and take out minority interest, so no recording of dividends either. It’s been a while, so someone should confirm this.

Dreary Wrote: ------------------------------------------------------- > Yes, but for equity method only share of earnings > gets recorded. For full consolidation, you > combine revenues and expenses, and take out > minority interest, so no recording of dividends > either. It’s been a while, so someone should > confirm this. I agree with that

but dividends are a return of capital. so the equity investment recorded gets reduced by the $800,000

we’re talking about the income statement effects

it was more an interjection to point out that the dividend doesn’t just vanish into thin air even though its not reflected on the I/S. I should have been more clear.

under consolidation, parent company should include %of non-owning divident as minority interest under equity method, parent company include %of owned divident as equity in income. it’s on scheweser book2 P 125

achogogo Wrote: ------------------------------------------------------- > under consolidation, parent company should include > %of non-owning divident as minority interest I see it differently - the parent includes the % of ‘non-owned’ income as minority interest >under equity method, parent company include %of owned divident as equity in income. I also disagree - the parent includes the percentage of the subsidiary’s net income as ‘equity in income’

Corrections: (What has been written by achogogo is BS - please, sorry to state it so bluntly). consolidation --> it is non-owned percentage of sub’s equity (included Common Stock and Retained Earnings) --> not dividend as stated above -> as Minority Interest. Equity method: Dividend from Sub. is a REDUCTION in Investment account – would not be Net Income on Income statement for the Parent. Achogogo -> Please re-read pg 125 again. the 1000$ dividend never shows up anywhere on the Income statement of the Parent. For Equity Method: P owns 80% of S - S has income of 4000 -> 80% of 4000 = 3200 = Equity income. For Consolidation Method: Add full 4000 to the Income of Parent. Remove 20% of Sub’s Net Income (=800) off because Parent does not have any rights on that.

perhaps achogogo is the MOLE?

> Corrections: (What has been written by achogogo is BS - please, sorry to state it so bluntly). I think cpk meant achogogo is BS (i.e., balance sheet), right cpk?

NEVER FORGET: BEGINNING RETAINED EARNING + NET INCOME - DIVIDENDS = ENDING RETAINED EARNINGS NET INCOME IS SEPARATE FROM DIVIDENDS IN CONSOLIDATION AND EQUITY

sorry guys & thanks CPK for correction looks like still a long road to get prepared