Forest Ltd

question 42

Multiple Choice

Forest Ltd.reports its investment in Leeds Co.using the cost method.During the year,Forest received $10,000 in dividends from Leeds.How should Forest report these dividends?

• A)As an increase to the "Investment in Leeds Co." account on its statement of financial position
• B)As a decrease to the "Investment in Leeds Co." account on its statement of financial position
• C)As dividend income on its statement of changes in equity-retained earnings section
• D)As dividend income in its statement of comprehensive income

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Definitions:

Average Daily Float

Indicates the average amount of un-cleared checks or unprocessed transactions in a company's bank account over a certain period, impacting the available balance.

Cheques

A method of payment that allows an individual to instruct their bank to pay a specific amount from their account to another party.

Daily Interest Rate

This is the interest rate applied to a loan or investment for a single day, often used in calculating accrued interest over a period.

Collection Float

The time difference between when a check is deposited and when the funds are available in the account, affecting the business’s cash flow.