Assertion A Dividend paid out of pre acquisition profit by the subsidiary company to the holding com......

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Assertion (A) : Dividend paid out of pre-acquisition profit by the subsidiary company to the holding company is deducted from the cost of investment. (2 marks)

Reason (R) : Dividend paid out of pre-acquisition profit by the subsidiary company should be treated as a return of capital to the holding company. Which one of the following is correct ?

Both (A) and (R) are correct.

(A) is correct, but (R) is wrong

(A) is wrong, but (R) is correct.

Both (A) and (R) are wrong.

Explanation:

Both (A) and (R) are correct.