Samba Company acquired 10,000 shares of the common stock of Pati Corp.in July 2014.The following January,Pati announced a $100,000 net income for 2014 and declared a cash dividend of $.50 per share on its 100,000 shares of outstanding common stock.The Samba Company dividend revenue from Pati Corp.in January 2014 would be

Question

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Samba Company acquired 10,000 shares of Pati Corp.'s common stock. Since Pati Corp. declared a cash dividend of $.50 per share on its 100,000 shares of outstanding common stock, Samba Company is entitled to receive a portion of the dividend payment equal to the proportion of shares it owns.

Thus, the calculation for the dividend revenue from Pati Corp. for Samba Company would be:

Dividend Revenue = (Number of shares owned by Samba Company / Total number of outstanding shares) x Dividend per share

Dividend Revenue = (10,000 / 100,000) x $.50 = $5,000

Therefore, the correct answer is C) $5,000.

Samba Company Acquired 10,000 Shares of the Common Stock of Pati