ABC declared a property dividend. The dividend consisted of 10,000 common shares
ID: 2492599 • Letter: A
Question
ABC declared a property dividend. The dividend consisted of 10,000 common shares of its investment in XYZ Company. The shares had originally been purchased at $4 per share and had a $1 par value. The value of the shares on the declaration date is $7 per share. What is the first entry that should be recorded related to this dividend? a. Retained earnings 70,000 Property dividends payable 70,000 b. Retained earnings 70,000 Property dividends payable 40,000 Gain 30,000 c. Investment in XYZ 30,000 Retained earnings; 30,000 d. Investment in XYZ 30,000 Gain 30,000 A. Option a B. Option d C. Option c D. Option b
Explanation / Answer
It is option D
Retained earnigns =7*10000=70,000 (db)
Dividend payabel (cr)40,000
gain (cr) 30,000