Big Business Limited Distributes a Fully Franked Dividend to Its

question 55

Multiple Choice

Big Business Limited distributes a fully franked dividend to its shareholders. Which of the following statements best describes the outcome for shareholders?

• A)The company pays tax on the profits from which the dividend is paid.
• B)The profits from which the dividend is paid are not taxed at the corporate level.
• C)Shareholders must include their share of the profit from which the dividend is paid in their personal income tax return, but this amount is disregarded for their personal tax purposes.
• D)both B and C

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Definitions:

Cash Balance

The amount of cash a company has available at any point in time, as reflected in its financial statements.

Timing Differences

Discrepancies between the timing of cash flows and the recognition of revenues and expenses in accounting records.

Recording Error

Mistakes made during the accounting process of recording financial transactions.

Journal

The initial record in which the effects of a transaction are recorded.