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Chapter 15: Question 26Q (page 810)

This comment appeared in the annual report of MacCloud Inc.: “The Company could pay cash or property dividends on the Class A common stock without paying cash or property dividends on the Class B common stock. But if the Company pays any cash or property dividends on the Class B common stock, it would be required to pay at least the same dividend on the Class A common stock.” How is a property dividend accounted for in the financial records?

Short Answer

Expert verified

According to Generally Accepted Accounting Principles, property dividends must be reported at fair market value, often not the same as the asset's net book value.

Step by step solution

01

Meaning of Property Dividend

A property dividend is a type of dividend that substitutes property for cash or stock dividends. Despite being a non-monetary payout, property dividends have monetary worth.

02

Explaining Property Dividends financial record

A non-reciprocal transfer of non-monetary assets between a firm and its owners is known as a property dividend. A non-reciprocal transfer of a non-monetary asset to a stockholder or another entity should be reported at the fair value of the item transferred,with a gain or loss recognized at the asset's disposal.

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Most popular questions from this chapter

What features or rights may alter the character of preferred stock?

Discuss the propriety of showing:

  1. Treasury stock as an asset.
  2. “Gain” or “loss” on sale of treasury stock as additions to or deductions from income.
  3. Dividends received on treasury stock as income.

Satchel Inc. purchases 10,000 shares of its own previously issued \(10 par common stock for \)290,000. Assuming the shares are held in the treasury with intent to reissue, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total stockholders’ equity?

Distinguish among: cash dividends, property dividends, liquidating dividends, and stock dividends.

Use the information from BE15-13, but assume Green Day Corporation declared a 100% stock dividend rather than a 5% stock dividend. Prepare the journal entries for both the date of declaration and the date of distribution.
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