A is corrent. Any dividend which exceeds the balance of retained earnings is considered a liquidating dividend. In this case, the cash dividend exceeds 12/31/Y1 retained earnings by $175,000 ($600,000 - $425,000). The $175,000 represents the liquidating portion of the dividend.
B is incorrect. Any dividend which exceeds the balance of retained earnings is considered a liquidating dividend. In this case, the cash dividend exceeds 12/31/Y1 retained earnings by $175,000 ($600,000 - $425,000). The $175,000 represents the liquidating portion of the dividend.
C is incorrect. Any dividend which exceeds the balance of retained earnings is considered a liquidating dividend. In this case, the cash dividend exceeds 12/31/Y1 retained earnings by $175,000 ($600,000 - $425,000). The $175,000 represents the liquidating portion of the dividend.
D is incorrect. Any dividend which exceeds the balance of retained earnings is considered a liquidating dividend. In this case, the cash dividend exceeds 12/31/Y1 retained earnings by $175,000 ($600,000 - $425,000). The $175,000 represents the liquidating portion of the dividend.
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