Question

In: Accounting

________ will ALL increase a​ company's capital dividend account. Choose the correct answer. A. Life insurance​...

________ will ALL increase a​ company's capital dividend account.

Choose the correct answer.

A. Life insurance​ proceeds, net capital​ gains, and the additional refundable tax on investment income​ (ART)

B. Stock dividends received from other​ corporations, non-taxable life insurance proceeds​ & non-taxable portion of capital gains

C. Capital dividends received from other​ corporations, non-taxable life insurance proceeds​ & non-deductible portion of capital losses

D. Capital dividends received from other​ corporations, non-taxable life insurance proceeds​ & non-taxable portion of capital gains

Solutions

Expert Solution

Capital dividend account is prepared to pay tax free dividends to the shareholders. Only certain specified items will be part of Capital dividend account

Correct Statement:

Capital dividends received from other​ corporations, non-taxable life insurance proceeds​ & non-taxable portion of capital gains will ALL increase a​ company's capital dividend account.

Option D is correct

Explanation why other options are not correct:

Option No. Option details Explanation
A Life insurance​ proceeds, net capital​ gains, and the additional refundable tax on investment income​ (ART) Only non-taxable portion of capital gains will form part of Capital dividend. Also additional refundable tax on investment income​ (ART) will not form part of Capital dividend
B Stock dividends received from other​ corporations, non-taxable life insurance proceeds​ & non-taxable portion of capital gains Only capital dividends received from other corporations will form part of capital dividend, not all dividends
C Capital dividends received from other​ corporations, non-taxable life insurance proceeds​ & non-deductible portion of capital losses Non deductible portion of capital losses will be reduced from capital dividend. It will not increase a a​ company's capital dividend account

ekkarill92 answered 2 years ago
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