On November 1, 2016, the Cranberry Construction Company declared a property divi

Question

On November 1, 2016, the Cranberry Construction Company declared a property dividend payable in the form of bonds held for long-term investment purposes. THe bonds will be distributed to the common stockholders on December 15, 2016. The bonds to be distributed to the common shareholders orginally cost Cranberry $210,000. Fair values of the bonds on various dates are as follows:

Dec 31, 2015 : 220,000

Nov 1, 2016 : 235,000

Dec 15, 2016 : 225,000

Which of the following amounts should be used to record the appropriate credit to Property Dividends Payable?

a. 210,000    b. 220,000    c. 235,000    d. 230,000

Explanation / Answer

First of all we need to know the meaning of Property Dividend.

Property Dividend is a non-monetary dividends to investors, rather than making a cash or stock payment. Recording of distribution take place in the books at fair market value of the assets distributed on the date of declaration of property dividend.

Hence, the fair value of bonds at the date of declaration of property dividend should be taken...i.e. $235,000

Hence, the correct option is c. $235,000

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