Liquidating dividend equity method


15-Sep-2019 12:18

The management team at Company A has decided to declare a dividend of .00 per share and has 800,000 shares of common stock outstanding.The company balance sheet shows 0,000 in retained earnings and ,000,000 in paid in capital in excess of par.This concept is different than regular dividends, which are paid from the company's profits or retained earnings.This difference has income tax implications to shareholders.Remember, investment and investment Income accounts are always reciprocal to each other except for when the dividend is received by the Investor.With this, I wind up the topic related to Investments.To the extent Company A's share of Company B's earnings are distributed as cash dividends, the Cash taxes are paid by the investor only on cash dividends received.

When Company A (the investor) has significant influence over Company B (the investee)—but not majority voting power—Company A accounts for its investment in Company B using the equity method of accounting.Company A records its proportionate share of the subsidiary's earnings as an increase to the account on its balance sheet.These earnings may be distributed as cash dividends, or retained by Company B.I have tried to wrap the significant areas related thereto and and earnestly wish that you find it useful.

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The term liquidating dividend refers to the process of providing shareholders with a partial or full distribution of their capital investment in the company.The company does not actually record the subsidiary's assets and liabilities on its balance sheet.



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