Reference no: EM132959412

Problem 1: An entity has 20% investment in ordinary share and 25% investment in preference share over the investee. Which of the following is true?

a. Only the cash dividend received related to 20% is treated as dividend income

b. Only the cash dividend received related to 25% is treated as dividend income

c. Cash dividend received for both investments should be treated as dividend income

d. Cash dividend received for both investments should be treated as a deduction from investment

Problem 2: If an associate has a preference share, the proper way of computing the share in net income of an associate for the current year assuming the preference share is cumulative would be

a. Deduct the preference dividend for the current year only, whether declared or not

b. Deduct the preference dividend for the current year, if declared only

c. Deduct the preference dividend for the current year including any previous undeclared preference dividend

d. Deduct both the preference and ordinary dividend for the current year only, whether declared or not

Problem 3: Which of the following items should be treated as dividend income?

a. Reverse stock split

b. Same class of share dividend

c. Different class of share dividend

d. Cash dividend under equity method