Discuss how a corporation records the declaration of a property dividend.
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Discuss how a corporation records the declaration of a property dividend. |
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Property dividends are the dividends declared that are payable in assets other than cash.
Explanation
A company will treat the property dividends in the same way as the cash dividends on the date of declaration. On the date of payment, the asset (property) account is credited instead of the cash account.
Verified Answer
When there is a requirement to change the value of the asset declared as a dividend from its book value to its current market value, the company will make an entry to revalue its asset and record the gain or loss from such revaluation on the date of dividend declaration.
After the revaluation entry is made, the company will reduce the balance of retained earnings by debiting the retained earnings account by the value of the asset. A liability account named 'property dividends payable' will be credited with the same amount.
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