Dividends and investment accounting method
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Would you rather receive a cash or stock dividend? Why?
What are the criteria for using the cost, equity, or consolidated method of accounting?
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Solution Summary
The solution explains difference between cash and stock dividend and the criteria to be used for accounting for investment
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a. Cash or Stock Dividend - The decision would be based on
1. Tax Implications - Cash dividend would be current income and would be taxed on receipt, while stock dividend would be taxed on sale. Also capital gains on sale may be taxed at a lower rate than curent income in the form of dividend.
2. Future Dividends - In stock dividend, the number of shares increases with the ...
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