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Palmer Corp. owned 20,000 shares of Dixon Corp. purchased in 2006 for $240,000. On December 15, 2009, Palmer declared a property dividend of all of its Dixon Corp. shares on the basis of one share of Dixon for every 10 shares of Palmer common stock held by its stockholders. The property dividend was distributed on January 15, 2010. On the declaration date, the aggregate market price of the Dixon shares held by Palmer was $400,000. The entry to record the declaration of the dividend would include a debit to Retained Earnings of

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Answer:

Debit to Retained Earnings of $400,000

Explanation:

Based on the information given we were told that on the declaration date, the market price or the market value of the Dixon Corp shares that was been held by Palmer Corp was the amount of $400,000 which means that the entry to record the declaration of the dividend would include a debit to Retained Earnings of the amount of $400,000 which is the market value.

The entry to record the declaration of the dividend would include a debit to Retained Earnings of $400,000.

The following information should be considered:

  • Since the aggregate market price of the Eaten shares on the declaration date is $400,000.
  • Therefore, at the time of recording the declaration of the dividend it should debited  to the retained earning for $400,000

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