Question

Redford Corp owned 100,000 shares of Newman Corp. These shares were purchased in early 2016 for...

Redford Corp owned 100,000 shares of Newman Corp. These shares were purchased in early 2016 for $400,000. On May 5, 2018, Redford declared a property dividend of one share of Newman for every five shares of Redford held by a stockholder. On that date, when the market price of Newman was $3 per share, there were 50,000 shares of Redford outstanding. What unrealized loss and net reduction in retained earnings would result from this property dividend of Newman Corp to shareholders of Redford Corp? (Take it one part at a time)

Select one:

Loss $40,000, Net reduction in R/E $40,000

Loss $40,000, Net reduction in R/E $0

Loss $100,000 ,Net reduction in R/E $400,000

Loss $10,000, Net reduction in R/E $40,000

Loss $30,000, Net reduction in R/E $10,000

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Redford Corp owned 100,000 shares of Newman Corp.

shares were purchased in early 2016 for $400,000.

market price of Newman was $3 per share

Share of Redford outstanding = 50,000 shares

.

> Number of share issued as property dividend = 50000 / 5 = 10000

.

> Market price of share issued as property dividend = 10000 * 3 = $30000

.

> Cost of 10000 share of Newman Corp = 400000 / 100000 * 10000 = 40000

.

So,

Net loss = 30000 - 40000 = $10000

.

Property dividend = $30000

Hence,

Net reduction in Retained earnings = -10000 - 30000 = $40000

.

Where,

Retained earnings will decreased by the unrealized loss of $10000 ad also decreased by market value of property dividend distributed of $30000. So,

The net reduction in Retained earnings = $40000

.

,

Ans: Loss $10,000, Net reduction in R/E $40,000

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
KIM Corporation owned 50,000 shares of SHIN Corporation. These shares were purchased in 2014 for $550,000....
KIM Corporation owned 50,000 shares of SHIN Corporation. These shares were purchased in 2014 for $550,000. On November 15, 2018, KIM declared a property dividend of one share of SHIN for every ten shares of KIM held by a stockholder. On that date, when the market price of SHIN was $25 per share, there were 240,000 shares of KIM outstanding. What gain and net reduction in retained earnings would result from this property dividend? a. Gain                                     Net Reduction in Retained Earnings...
KIM Corporation owned 50,000 shares of SHIN Corporation. These shares were purchased in 2014 for $550,000....
KIM Corporation owned 50,000 shares of SHIN Corporation. These shares were purchased in 2014 for $550,000. On November 15, 2018, KIM declared a property dividend of one share of SHIN for every ten shares of KIM held by a stockholder. On that date, when the market price of SHIN was $25 per share, there were 240,000 shares of KIM outstanding. What gain and net reduction in retained earnings would result from this property dividend?
Cash dividends declared on the no par value common shares of Athens Corp. were as follows:...
Cash dividends declared on the no par value common shares of Athens Corp. were as follows: 1st quarter of 2020 $330,000 2nd quarter of 2020 350,000 3rd quarter of 2020 420,000 4th quarter of 2020 450,000 The 4th quarter cash dividend was declared on December 20, 2020, to shareholders of record on December 31, 2020, to be paid on January 9, 2021. In addition, Athens declared a 10% common stock dividend on December 1, 2020, when there were 400,000 shares...
On January 1, Year 1, Company A purchased 25% of Company B's 100,000 outstanding shares of...
On January 1, Year 1, Company A purchased 25% of Company B's 100,000 outstanding shares of common stock for $10 per share. Company A applies the equity method for its investment in Company B. Company B reported a net profit of $400,000 for Year 1. For each of the following independent situations that occurred during Year 2, select the Year 2 effect on the carrying amount of Company A's investment in Company B. Each choice may be used once, more...
Elysium Corp. had the following relevant account balances at 1/1/17: Common stock ($1 par value, 100,000...
Elysium Corp. had the following relevant account balances at 1/1/17: Common stock ($1 par value, 100,000 shares issued and 87,000 outstanding at 1/1/17) $100,000 Additional Paid-in Capital – CS $4,200,000 7% Preferred stock ($500 par value, 25,000 shares issued and outstanding) $12,500,000 Treasury Stock 689,000 Additional Paid-in Capital – TS 0 Retained Earnings $137,783,000 The following transactions occurred during 2017. ? Elysium reissued 7,000 shares of treasury stock at an issue price of $73 a share. ? Elysium declared a...
On January 1st, 2018, LSU Inc. purchased 25,000 of the 100,000 common shares of Blizzard Co....
On January 1st, 2018, LSU Inc. purchased 25,000 of the 100,000 common shares of Blizzard Co. for $14 per share. Blizzard declared a dividend of $30,000 on June 30th, 2018. On Dec. 31, 2018, Blizzard reported net income of $400,000 and the fair market value of its stock at that point in time was $18 per share. Prepare all necessary journal entries relating to this investment for LSU Inc., Please show all work.
6.  A company had 10,000 shares outstanding on 1/1.  1,000 new shares were issued on 6/1, and 1,750...
6.  A company had 10,000 shares outstanding on 1/1.  1,000 new shares were issued on 6/1, and 1,750 shares of treasury stock were purchased on 9/1.  What is the weighted average number of shares to be used for the year-end earnings per share calculation (if necessary,  round to the nearest whole share)? a. 10,000                  b. 10,083                        c. 10,063                        d. 9,250 Jones Corporation has 100,000 shares of $20 par value common stock outstanding.  If Jones declares a 20% stock dividend on its common stock when the...
Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 2016, were...
Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 2016, were as follows: Record on journal page 10: Jan. 3 Issued 15,000 shares of $20 par common stock at $30, receiving cash. Feb. 15 Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash. May 1 Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually. 16 Declared a dividend of $0.50 per share on common stock and $1.00 per...
Tem Ora Ltd supplied the following information on its shareholders’ equity as at 30 June 2015....
Tem Ora Ltd supplied the following information on its shareholders’ equity as at 30 June 2015. Tem Ora Ltd Balance Sheet as at 30 June 2015 (extract) Shareholders’ equity $ $ Capital (400,000 ordinary shares paid to $ 1.00) 400,000 Capital (100,000 7% preference shares paid to $2.00 each) 200,000 Retained earnings 165,000 Dividend equalisation reserve 150,000 Total shareholders’ equity 915,000 Additional information: Profit after tax for the year ended 30 June 2016 was $250,000; On 29 July 2015, buildings...
Adella Corp. has outstanding 50,000 shares of $1 par value common stock as well as 10,000...
Adella Corp. has outstanding 50,000 shares of $1 par value common stock as well as 10,000 shares of 6%, $100 par value cumulative preferred stock. At the beginning of the year, the balance in retained earnings was $500,000, and one year’s dividends were in arrears. Net income for the current year is $260,000. Compute the balance in retained earnings at the end of the year if Adella Corp. pays a dividend of $2 per share on its commons tock this...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT