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?

Understand how financial information's relevance and reliability are maintained through standards such as generally accepted accounting principles (GAAP).

Identify the components of shareholders' equity and understand its reporting.

Recognize the importance of liquidity order in presenting current assets and liabilities in financial statements.

Understand the distinction between physical and intangible assets and their presentation in financial reports.

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Definitions:

Utilitarianism

A theory in normative ethics holding that the best moral action is the one that maximizes utility, usually defined as that which produces the greatest well-being of the greatest number of people.

Categorical Imperative

A central philosophical concept in the deontological moral philosophy of Immanuel Kant, which asserts that an action is morally right if it can be universally applied as a principle.

Universal Law

A principle or rule that is thought to be applicable to all members of a group or category without exception.

Moral Sentiment

The emotional aspect of morality, including feelings of right and wrong, that influences ethical decision-making.