Explain heated debate about dividends

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Susan and Rodney have been having a heated debate about dividends. Susan states she learned in her first accounting course that dividends are paid out of net income. Rodney argues she is mistaken. He says dividends are paid out of earnings and profits. Analyze who is correct in the above scenario, Susan or Rodney, and explain why.

Analyze and discuss the following questions:

  • Rodney states every distribution by a corporation is a dividend. Is he right? Why or why not?
  • Susan thinks that if she owned her own company she would issue a property dividend. Why would she think this?
  • Susan told Rodney she did not want her year-end dividend until January of next year. What type of dividend is this really?

Reference no: EM133246928

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