Dividends Paid Between Entities in the Group Should Be

question 25

Multiple Choice

Dividends paid between entities in the group should be:

• A) not permitted by the ultimate controlling entity because it does not make sense to exchange money between entities in the one economic group.
• B) reflected in the group accounts because it reflects the economic return the group earned by investing in the companies that form its operations.
• C) eliminated from the group accounts, but reflected in the individual legal entity accounts, since the group accounts reflect the many entities as one single economic entity.
• D) retained in the consolidated statements but disclosed separately as related-party transactions.

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Definitions:

Bond Redemption

A financial term referring to the process of repaying the principal amount of a bond at its maturity date.

Market Value

Market value refers to the price at which an asset would trade in a competitive auction setting.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return.

Market Rate

The prevailing interest rate that is available in the marketplace for loans or deposits, often determined by supply and demand forces.