In 20X0, Neil Company held the following investments in common stock: 25,000 shares of B&K Incorporated’s 100,000 outstanding shares. Neil’s level of ownership gives it the ability to exercise significant influence over the financial and operating policies of B&K.

  In 20X0, Neil Company held the following investments in common stock:

25,000 shares of B&K Incorporated’s 100,000 outstanding shares. Neil’s level of ownership gives it the ability to exercise significant influence over the financial and operating policies of B&K.
6,000 shares of Amal Corporation’s 309,000 outstanding shares.
During 20X0, Neil received the following distributions from its common stock investments:

November 6    $ 30,000 cash dividend from B&K
November 11    $ 1,500 cash dividend from Amal
December 26    3 percent common stock dividend from Amal
The closing price of this stock was $115 per share.
What amount of dividend revenue should Neil report for 20X0?

Multiple Choice

$34,200


$4,200


$31,500


$1,500 Correct

 
Explanation

Because the ownership in Amal Corporation is less than 20%, the investment should be carried at fair value. Accordingly, the $1,500 dividend received from Amal is recorded as dividend revenue.

($4,200) Incorrect. Stock dividends are not recorded as income.
($31,500) Incorrect. The cash dividend received from B&K is not recorded as dividend revenue because it is accounted for under the equity method.
($34,200) Incorrect. The stock dividend and cash dividend from B&K are not recorded as dividend revenue.