Reference no: EM132913086
Problem 1: A company holds an equity investment accounted for as financial asset at fair value through profit or loss. A stock dividend was received by the company on its investment. Which of the following statements is true on the treatment of the stock dividends?
a. The cost of each share will increase as the carrying amount of the investment will be spread over a fewer number of shares.
b. Dividend income will be recognized by the investor equal to the fair value on the date of declaration of the additional shares to be received from the stock dividends.
c. The total assets and equity of the investor will remain the same despite the stock dividends received from the investment.
d. The fair value on the date of issuance of the additional shares to be received from stock dividends will be capitalized to the investment account.
Problem 2: Which of the following is not true about the ex-dividend date
a. Dividend income from an equity security will be recorded by the investor for any purchase transaction involving the investment before the ex-dividend date
b. The proceeds from any sale transaction involving an equity security before the ex-dividend date will include the right to receive the dividends previously declared on the investment.
c. No dividend receivable from the investment will be recorded by the investor for any purchase transaction involving an equity security on or after the ex-dividend date
d. The ex-dividend date in the Philippine setting is normally set on three (3) business days before the record date.
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