Question

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

tanya

recognize when she receives the stock​ dividend?

Tanya will recognize

in income when she receives the stock dividend.

Answer 1

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.

Stock​ dividend:

8% x 1,000 ​shares,

= 80 shares

On Distribution date, Income from stock dividend = 80 shares * $100

   =$8000

b)

Basis for 100 preferred shares:

$140,000* $ 10,000 / $190,000

=1,400,000,000 /190,000

= $7,368.42

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