The 12/31/2018 balance sheet of Despot Inc. included the following: In January 2

Question

The 12/31/2018 balance sheet of Despot Inc. included the following:

In January 2018, Despot recorded a transaction with this journal entry:

Despot declared a property dividend to give marketable equity securities to its common stockholders. The securities had cost Despot $7 million and currently have a fair value of $16 million. Which of the following would be included in recording the property dividend declaration?

Decrease in retained earnings for $7 million.

Increase in a liability for $16 million.

Decrease in marketable securities by $16 million.

All of these answer choices are correct.

Common stock, 25 million shares at $20 par $ 500 million Paid-in capital—excess of par 3,000 million Retained earnings 980 million

Explanation / Answer

Increase in a liability for $16 million. Option B is correct

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