D is corrent. A transfer of a nonmonetary asset to a stockholder in a nonreciprocal transfer should be recorded at the fair value of the asset transferred and a gain or loss should be recognized on the disposition. The number of shares distributed is 900 (9,000 shares/10) at a total market price of $12,600 (900 shares × $14 per share). The cost of the shares is $9 per share ($9,000/1,000) and a total cost of $8,100 (900 shares × $9). The gain recognized from appreciation of securities is $4,500 ($12,600 – $8,100). The net reduction in retained earnings results from recording the declaration of the stock dividend and closing of the gain at the end of the period.| Decrease in retained earnings at declaration | $12,600 | | Less: increase from gain recognized | – 4,500 | | Net decrease in retained earnings | $ 8,100 |
A is incorrect. A transfer of a nonmonetary asset to a stockholder in a nonreciprocal transfer should be recorded at the fair value of the asset transferred and a gain or loss should be recognized on the disposition. The number of shares distributed is 900 (9,000 shares/10) at a total market price of $12,600 (900 shares × $14 per share). The cost of the shares is $9 per share ($9,000/1,000) and a total cost of $8,100 (900 shares × $9). The gain recognized from appreciation of securities is $4,500 ($12,600 – $8,100). The net reduction in retained earnings results from recording the declaration of the stock dividend and closing of the gain at the end of the period.| Decrease in retained earnings at declaration | $12,600 | | Less: increase from gain recognized | – 4,500 | | Net decrease in retained earnings | $ 8,100 |
B is incorrect. A transfer of a nonmonetary asset to a stockholder in a nonreciprocal transfer should be recorded at the fair value of the asset transferred and a gain or loss should be recognized on the disposition. The number of shares distributed is 900 (9,000 shares/10) at a total market price of $12,600 (900 shares × $14 per share). The cost of the shares is $9 per share ($9,000/1,000) and a total cost of $8,100 (900 shares × $9). The gain recognized from appreciation of securities is $4,500 ($12,600 – $8,100). The net reduction in retained earnings results from recording the declaration of the stock dividend and closing of the gain at the end of the period.| Decrease in retained earnings at declaration | $12,600 | | Less: increase from gain recognized | – 4,500 | | Net decrease in retained earnings | $ 8,100 |
C is incorrect. A transfer of a nonmonetary asset to a stockholder in a nonreciprocal transfer should be recorded at the fair value of the asset transferred and a gain or loss should be recognized on the disposition. The number of shares distributed is 900 (9,000 shares/10) at a total market price of $12,600 (900 shares × $14 per share). The cost of the shares is $9 per share ($9,000/1,000) and a total cost of $8,100 (900 shares × $9). The gain recognized from appreciation of securities is $4,500 ($12,600 – $8,100). The net reduction in retained earnings results from recording the declaration of the stock dividend and closing of the gain at the end of the period.| Decrease in retained earnings at declaration | $12,600 | | Less: increase from gain recognized | – 4,500 | | Net decrease in retained earnings | $ 8,100 |
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