Stinson Corporation owned 30,000 shares of Matile Corporation. These shares were

Question

Stinson Corporation owned 30,000 shares of Matile Corporation. These shares were purchased in 2011 for $270,000. On November 15, 2015, Stinson declared a property dividend of one share of Matile for every ten shares of Stinson held by a stockholder. On that date, when the market price of Matile was $28 per share, there were 270,000 shares of Stinson outstanding. What gain and net reduction in retained earnings would result from this property dividend?

Gain

Net Reduction in

Retained Earnings

A) $0

$243,000

B) $0

$756,000

C) $513,000

$108,000

D) $513,000

$243,000

Gain

Net Reduction in

Retained Earnings

Explanation / Answer

B) $0 $756,000 No of shares Outstanding of Stinson                 270,000.00 No of shares issued of Matile = 270,000/10                   27,000.00 Market Price of Matile                            28.00 Reduction in Retained Earninsg = Value of shares issued = 27000*28                 756,000.00 Gain is Nil

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