In July 2011, Leaf Company acquired 5,000 shares of the common stock of Ryan Corporation and classified the shares as trading securities. The following January, Ryan announced net income of $100,000 for 2011 and declared a cash dividend of $0.50 per share on its 100,000 shares of outstanding common stock. The Leaf Company dividend revenue from Ryan Corporation in January 2012 would be

Question

Quizplus · Accepted Answer

Leaf Company acquired 5,000 shares of Ryan Corporation's common stock as trading securities, which means that they are holding these shares to generate profits from short-term price fluctuations. As a result, Leaf Company would record the cash dividend of $0.50 per share as dividend revenue on their income statement.

Leaf Company owns 5,000 shares out of the total 100,000 shares of Ryan Corporation's common stock outstanding. Therefore, the total dividend revenue earned by Leaf Company from Ryan Corporation would be:

Dividend revenue = (5,000 shares / 100,000 shares) x ($0.50 per share) x (1 year / 12 months)

Dividend revenue = $2,500

Thus, the correct answer is B) $2,500.

In July 2011, Leaf Company Acquired 5,000 Shares of the Common