Here’s a question;
A buys 25% of B and is following Equity accounting. B has net income of 20000 and gives out 3200 in dividends. I thought 1/4 of those 3200 dividends go to A since A has 1/4 ownership. But according to example 5 in Intercorporate Investments CFAI, 3200/4 is deducted from calculation of investment in B as shown in A’s account. Can anybody explain?
I am probably not reading something properly but is there ever a case/accounting method where subsidiary’s dividend payout actually benefits the investor?