What NET reduction in retained earnings would result from this property dividend?
Answer:
To determine the net reduction in retained earnings resulting from the property dividend, we need to calculate the fair value of the property dividend and then subtract it from the retained earnings.
First, let's calculate the number of Flint shares that Ivanhoe will distribute as a property dividend:
Ivanhoe owns 20,000 shares of Flint
The property dividend is one share of Flint for every ten shares of Ivanhoe held
Therefore, Ivanhoe will distribute 2,000 shares of Flint as a property dividend (20,000 / 10)
Next, let's calculate the fair value of the property dividend:
The market price of Flint on September 15, 2026, was $30 per share
Ivanhoe will distribute 2,000 shares of Flint
Therefore, the fair value of the property dividend is $60,000 (2,000 x $30)
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