Melvern\'s Corp. has an investment in 15,000 shares of Wallace Comp. common stoc

Question

Melvern's Corp. has an investment in 15,000 shares of Wallace Comp. common stock with a cost of $654,000. These shares are used in a property dividend to stockholders of Melvern's. The property dividend is declared on May 25 and scheduled to be distributed on July 31 to stockholders of record on June 15. The fair value per share of Wallace stock is $63 on May 25, $66 on June 15, and $68 on July 31. The net effect of this property dividend on retained earnings is a reduction of A. $1,020,000 B. 990,000 C. 945,000 D. $654,000 Please justify your answer and explain

Explanation / Answer

C. 945,000 ,

Property dividend is recorded at Fair market value on declaration date

Property Dividend is declared on May 25 (at FMV of $63)

Property Dividend= 15000 shares * $63

   = $945000

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects