A Firm Declares a Property Dividend to Its Shareholders

question 24

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

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Definitions:

Quantity Supplied

How much of a product or service that sellers are willing and able to transact at a given price level.

Equilibrium Price

The market price at which the quantity of goods supplied is equal to the quantity of goods demanded; it is the price that clears the market.

Surplus

A surplus refers to the amount by which the quantity supplied of a product or service exceeds the quantity demanded, often resulting in a decrease in prices.

Shortage

A market condition where the demand for a good exceeds its supply at a specific price, often leading to price increases.