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?
Number of SHIN Shares to be distributed | 24,000 | =240000/10 |
Market Value of SHIN share to be distributed | $ 600,000 | =24000*25 |
Cost of SHIN 24,000 shares to be distributed | $ 264,000 | =550000*24000/50000 |
Gain from this property dividend | $ 336,000 | =600000-264000 |
Net Reduction in Retained earnings | $ 264,000 | =600000-336000 |
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