On January 2, 2011, Adler Co. acquired 2,000 shares of Boxworth Co. common stock for $8,000 and classified these shares as available-for-sale securities. During 2011, Adler received $6,000 of cash dividends. Adler's share of Boxworth's 2011 earnings (net income) was $5,000. The fair value of Boxworth's stock on December 31, 2011, was $7 per share. Adler should report what amount in 2011 related to Boxworth Co.?

Question

Quizplus · Accepted Answer

Adler should report the $6,000 cash dividends received as revenue. The change in fair value of the stock is recognized in other comprehensive income, not as revenue, and the share of Boxworth's earnings is not recognized in revenue for available-for-sale securities.