Li Company declared a property dividend of 20,000 shares of its investment in $1 par P Company common

Li Company declared a property dividend of 20,000 shares of its investment in $1 par P Company common stock. The P stock was purchased for $5 per share. The fair value of the P stock was $10 per share on the declaration date of the property dividend and $12 per share on the distribution date. What is the amount of the dividend?

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  1. $200,000

    Explanation:

    DIVIDEND can be defined as the amount of cash which is been paid regularly by a company to its shareholders out of its profits or surplus.

    Property dividend of 20,000 shares ×

    Fair value of the P stock at $10 per share on the declaration date of the property dividend.

    Therefore:

    20,000 x $10 = $200,000

    The amount of DIVIDEND is $200,000

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