QUESTION

Data Blockchain Labs (DBL) is a small public company listed on the TSX.V. DBL creates accounting ledger software that uses blockchain as the basis for a distributed ledger. They have been very successful, and are controlled tightly by a group of only a few investors. Currently, there are 10 investors, controlling 6,000 shares with a book value of $6,000,000. There has been only a single public offering of shares, the IPO to be listed on the TSX.V. The group of 10 investors is made up of institutional investors that dubiously managed to purchase all publicly offered shares. Each share has a fair value of 10x the book value. In its early stages, the company purchased investments in other companies, carried as FV-NI investments on the balance sheet at $824,000. They were last valued on December 31, 2019. The fair value is now $829,000. It is currently January 12, 2020.

Two BlockChainz, the CEO at DBL has engaged you, CPA, to provide advice on two issues:

• We have been very successful so far! Since our first share issue, the fair value of our shares has skyrocketed. The investors we have right now have been complaining to me that they want to sell some of their shares, but the fair value is very high! There are so few buyers, and I want to give our shares more mass-market appeal. Someone mentioned something about a stock dividend, but that doesnt sound right. Can you please give me at least two options as to how might we reduce the value of our shares without hurting our company, so that more people can buy them? [ASSESS] What do you recommend we do? [CONCLUDE]

• Everyone has been complaining to me that even though weve been very successful, we havent declared a dividend. However, I dont really feel like giving up any cash that we could use for growth. My accountant tells me something called a dividend in kind exists, and Id like to use our FV-NI investment to issue one. Can you help me prepare entries for this dividend? [ADVISE] I would like to declare it today and pay it on January 28, 2020. We will give out the entire balance of our FV-NI investments. Hint: show all journal entries for 2020.

ASSESS the Situation: maximum 2 sentences

ANALYZE Major Issues: maximum 6 sentences

CONLUDE: maximum 2 sentences, plus journal entries, if applicable

ADVISE: maximum 2 sentences