17. Late in Year One, a company buys one share of a publicly traded company for P75. This investment is reported as a trading security because the owner plans to sell the stock in the near future. At the end of Year One, this share is only worth P62. However, early in Year Two, the stock price soars to P80 and the stock is sold. A P2 cash dividend is also received by the owner in January of Year Two. What is the reported income effect of this ownership?
17. Late in Year One, a company buys one share of a publicly traded company for P75. This investment is reported as a trading security because the owner plans to sell the stock in the near future. At the end of Year One, this share is only worth P62. However, early in Year Two, the stock price soars to P80 and the stock is sold. A P2 cash dividend is also received by the owner in January of Year Two. What is the reported income effect of this ownership?
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 11P
Related questions
Question
![17. Late in Year One, a company buys one share of a
publicly traded company for P75. This investment
is reported as a trading security because the owner
plans to sell the stock in the near future. At the end
of Year One, this share is only worth P62. However,
early in Year Two, the stock price soars to P80 and
the stock is sold. A P2 cash dividend is also
received by the owner in January of Year Two. What
is the reported income effect of this ownership?
a. No change in income in Year One but a P5
increase in Year Two.
b. No change in income in Year One but a P7
increase in Year Two.
c. Net income is reduced P13 in Year One but an
P18 increase in Year Two.
d. Net income is reduced P13 in Year One but a
P20 increase in Year Two.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F295fed16-5775-4af6-bfe7-1ff5f7161249%2F116fb77c-33f0-4ebe-8ace-60bb6c658e0c%2F5snzwhdh_processed.jpeg&w=3840&q=75)
Transcribed Image Text:17. Late in Year One, a company buys one share of a
publicly traded company for P75. This investment
is reported as a trading security because the owner
plans to sell the stock in the near future. At the end
of Year One, this share is only worth P62. However,
early in Year Two, the stock price soars to P80 and
the stock is sold. A P2 cash dividend is also
received by the owner in January of Year Two. What
is the reported income effect of this ownership?
a. No change in income in Year One but a P5
increase in Year Two.
b. No change in income in Year One but a P7
increase in Year Two.
c. Net income is reduced P13 in Year One but an
P18 increase in Year Two.
d. Net income is reduced P13 in Year One but a
P20 increase in Year Two.
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