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12 June, 03:17

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?

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  1. 12 June, 04:30
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    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
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