Checkers Corporation Has a Single Class of Common Stock Outstanding

question 4

Essay

Checkers Corporation has a single class of common stock outstanding. Bert owns 100 shares, which he purchased five years ago for $200,000. In the current year, when the stock is worth $2,500 per share, Checkers Corporation declares a 10% stock dividend payable in common stock. Bert receives ten additional shares on December 10 of the current year. On January 25 of next year he sells all ten shares for $30,000.
a)How much income must Bert recognize when he receives the stock dividend?
b)How much gain or loss must Bert recognize when he sells the ten shares he received as a stock dividend?

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Definitions:

Four-firm Concentration Ratio

A measurement that indicates the combined market share of the four largest firms in an industry, used to assess the degree of competition within the market.

Herfindahl Index

A measure of market concentration that is used to determine the amount of competition among firms within an industry.

Import Competition

The competition between domestic products and foreign products in a domestic market, affecting local industries.

Herfindahl Index

A measure of the concentration of industries or markets, calculated as the sum of the squares of the market shares of the largest firms, used to assess the extent of competition.