Consolidated Financial Statements: Common Stock Dividends

What percentage of the common stock cash dividends declared by the individual companies should be reported as dividends declared in the consolidated financial statements?

Dividends declared by Pride/Dividends declared by Simba

A) 90%/0%

B) 90%/20%

C) 100%/0%

D) 100%/20%

Final answer:

In consolidated financial statements, only dividends declared to shareholders outside the group are reported. The percentage of common stock cash dividends declared in the consolidated financial statements should be 100% by Pride Inc.

Explanation:

When preparing consolidated financial statements, the dividends declared by the individual companies are not included. Only dividends declared to shareholders outside the group should be reported. Since Simba owns 10% of Pride's outstanding common stock, it is considered an intra-group transaction and not reported as dividends declared. Therefore, the percentage of common stock cash dividends declared in the consolidated financial statements would be the dividends declared by Pride, which is 100%.