Company A Limited owns 70% of the share capital of Company B Limited. Company B Limited paid a dividend of $10 000 during the financial period. The adjustment entries in the consolidation worksheet for the dividend include:
A) Dr Dividend revenue $7 000.
B) Dr Dividend revenue $10 000.
C) Dr Dividend payable $7 000.
D) Dr Dividend payable $10 000.

Question

Quizplus · Accepted Answer

When Company A owns 70% of Company B, it means Company A has a significant influence over Company B. Therefore, Company A should recognize its share of Company B's dividend as dividend revenue. The calculation is 70% x $10 000 = $7 000. The other options, B, C, and D, are incorrect because they either recognize the entire dividend as revenue or create a liability for the entire dividend, which is not accurate in this situation.

Company a Limited Owns 70% of the Share Capital of Company