How would a property dividend declared before end of reporting period and to be distributed in the next accounting period affect the retained earnings balance on the date of declaration, end of reporting period and date of payment?
How would a property dividend declared before end of reporting period and to be distributed in the next accounting period affect the retained earnings balance on the date of declaration, end of reporting period and date of payment?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On June 1, authorized ordinary shares were sold on a subscription basis at a price in excess of par value, and 20% of the subscription price was collected. On August 1, the remaining 80% of the subscription price was collected. Share capital would increase on
June 1 - Yes ; August 1 - Yes
June 1 - No ; August 1 - No
June 1 - No ; August 1 - Yes
June 1 - Yes ; August 1 - No
How would a property dividend declared before end of reporting period and to be distributed in the next accounting period affect the retained earnings balance on the date of declaration, end of reporting period and date of payment?
a. Retained earnings balance is only decreased on the date of declaration equivalent to the fair value of the non-cash asset to be distributed and no change at the end of reporting period and date of payment.
b.Retained earnings balance is decreased at the date of declaration equal to the fair value of the non-cash asset and any changes in the fair value of the non- cash asset is reflected also to the retained earnings balance at the end of reporting period and on the date of payment.
c.Retained earnings balance is only increased on the date of declaration equivalent to the fair value of the non-cash asset to be distributed and no change at the end of reporting period and date of payment.
d.Retained earnings balance is decreased at the date of declaration equal to the carrying value of the non-cash asset and any changes in the fair value of the non- cash asset is reflected also to the retained earnings balance at the end of reporting period and on the date of payment.
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