ZIP Company Owns 40,000 Shares of the Common Stock of PIK

question 156

Essay

ZIP Company owns 40,000 shares of the common stock of PIK Company. ZIP decided to divest itself of this investment by distributing the PIK shares in the form of a property dividend. The dividend ratio is one share of PIK for every four shares of ZIP common held by shareholders. ZIP has 160,000 common shares outstanding. On April 15, 2018, the date of declaration, PIK stock had a par of $5 per share, a book value of $12 per share, and a fair value of $17 per share.
Required:
Prepare any necessary journal entries. The shares were distributed on May 15, 2018, to stockholders of record on May 1, 2018

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