Title | Cum Ex dividend |
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Course | Financial Accounting |
Institution | Monash University |
Pages | 1 |
File Size | 68 KB |
File Type | |
Total Downloads | 100 |
Total Views | 139 |
Cumulative Dividends practice...
Consolidation Dividends Cum Dividend and Ex Dividend On acquisition: Cum (Cumulative) dividend means parent acquires the right to the dividend and thus it reduces purchase consideration by amount of dividend. Assume Purchase Consideration $500 000 Cum Dividend $10 000 Cum dividend reduces purchase consideration because you get the dividend. So, if you pay $500 000 for the subsidiary, you actually deduct for e.g. a $10 000 dividend and purchase consideration is $490 000. You also do a journal entry: Dr Dividend payable $10 000 Cr Dividend receivable $10 000 This is because you can’t pay a dividend to yourself. And a dividend to yourself is not a liability to the group. See page 943/4 of the text. If acquired on an ex dividend basis then parent pays $500 000 for the subsidiary. It DOES NOT reduce the purchase consideration. For Non-Controlling Interest (Week 9), process is same as above but you pay the dividend proportionately based on the percentage of ownership. See illustrative example 21.1 on page 1060 of the text....