Moss Corporation has a single class of common stock outstanding. Tanya owns 1,000 shares, which she purchased five years ago for $ 140,000. Moss declares a stock dividend payable in 8% preferred stock having a $ 100 par value. Each shareholder receives one share of preferred stock for ten shares of common stock. On the distribution December 16 of the current yearlong the common stock was worth $ 190 per share, and the preferred stock was worth $ 100 per share. On April 1 of the next year, Tanya sells half of her preferred stock for $ 11,500.
Requirement a. How much income must
recognize when she receives the stock dividend?
Tanya will recognize
in income when she receives the stock dividend.
Given data follows below:
Tanya owns = 1,000 shares,
She purchased five years ago for = $140,000.
Moss declares a stock dividend payable in = 8%
Preferred stock having a = $ 100 par value.
8% x 1,000 shares,
= 80 shares
On Distribution date, Income from stock dividend = 80 shares * $100
Basis for 100 preferred shares:
$140,000* $ 10,000 / $190,000
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