Question
KIM Corporation owned 50,000 shares of SHIN Corporation. These shares were purchased in 2014 for $550,000. On November 15, 2018, KIM declared a property dividend
KIM Corporation owned 50,000 shares of SHIN Corporation. These shares were purchased in 2014 for $550,000. On November 15, 2018, KIM declared a property dividend of one share of SHIN for every ten shares of KIM held by a stockholder. On that date, when the market price of SHIN was $25 per share, there were 240,000 shares of KIM outstanding. What gain and net reduction in retained earnings would result from this property dividend?
| a. | Gain Net Reduction in Retained Earnings $24,000 $ 576,000
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| b. | Gain Net Reduction in Retained Earnings $336,000 $ 264,000
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| c. | Gain Net Reduction in Retained Earnings $400,000 $ 144,000
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| d. | Gain Net Reduction in Retained Earnings $600,000 $ 24,000 |
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Corporate Finance Core Principles And Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
6th Edition
1260571122, 978-1260571127
