A Firm Declares a Property Dividend to Its Shareholders

question 173

Multiple Choice

A firm declares a property dividend to its shareholders.The assets to be distributed in the dividend have a combined book value of $40,000 and combined market value of $60,000.Before taxes, the net change in retained earnings as a result of this nonreciprocal transfer is:

• A)$0
• B)$60,000
• C)$20,000
• D)$40,000

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Definitions:

Financial Position Valuations

Assessments that determine the value of a company's assets, liabilities, and equity at a particular time, reflecting its financial health.

Average

A numerical value derived from the sum of several quantities divided by the number of quantities.

Goods Available

The total inventory that a business has ready for sale, including both existing inventory and newly acquired goods.