Case 1. Xyz Corp. is a family corporation. For not distributing dividends, it is suspected that the
members of the family are using the corporation for evading the taxes on income that properly belongs
to them, as the income is still with the corporation. The following data are from the records of XYZ
Corp.:
ฯรกรญd in Capital P 3,000,000
Retained Earnings
Appropriated for plant expansion 1,000,000
Appropriated for debt retirement 500,000
Appropriated for acquisition of a corporation where
a subsidiary relationship shall be established 2,000,000
Unappropriated 4,000,000
Total 7,500,000
You are to inform the company if it is ill-advised to retain profits of P 7,500,000. Would you
advise a dividend distribution, and at how much?
members of the family are using the corporation for evading the taxes on income that properly belongs
to them, as the income is still with the corporation. The following data are from the records of XYZ
Corp.:
ฯรกรญd in Capital P 3,000,000
Retained Earnings
Appropriated for plant expansion 1,000,000
Appropriated for debt retirement 500,000
Appropriated for acquisition of a corporation where
a subsidiary relationship shall be established 2,000,000
Unappropriated 4,000,000
Total 7,500,000
You are to inform the company if it is ill-advised to retain profits of P 7,500,000. Would you
advise a dividend distribution, and at how much?