Question

Boxer Company owned 20,000 shares of King Company that were purchased in 2019 for $500,000. On May 1, 2021, Boxer declared a property dividend of 1 share of King for every 10 shares of Boxer stock. On that date, there were 50,000 shares of Boxer stock outstanding. The market Price of the King stock was $30 per share on the date of declaration and $32 per share on the date of distribution. By how much is retained earnings reduced by the property dividend

Answer 1

Answer:

By 150,000.

Explanation:

Retained Earnings is the amount of net income remaining as left over for an organisation, this amount is realized after the organization has paid out dividends to its shareholders. The earnings are then to be retained so that it can come in use in near future.

50,000 shares is given for every 10 shares, it is equivalent to 5,000 for 1 share.

We will multiply by market value = 5,000 × $30 = $150,000.

So therefore, by 150,000 is the retained earnings reduced by the property dividend.