Question

Lucid Company declared a property dividend of 20,000 shares of $1 par Polk Company common stock.The Polk stock was purchased for $5 per share. Market value was $10 per share on the declaration dateand $11 per share on the distribution date.

What is the amount of the dividend?

A) $200,000
B) $100,000
C) $220,000
D) $40,000

Answer 1

The dividend amount is determined by the market value on the declaration date, which is $10 per share for 20,000 shares, resulting in a total dividend amount of $200,000.

Step-by-step explanation:

The amount of the dividend declared by Lucid Company involves a property dividend where the company distributes non-cash assets to shareholders. In this case, Lucid Company declared a property dividend consisting of 20,000 shares of $1 par Polk Company common stock. The value of the dividend is determined by the market value of the shares on the declaration date, not the purchase price or the value on the distribution date. The market value on the declaration date was $10 per share. Therefore, to calculate the total amount of the dividend we multiply the number of shares by the market value per share on the declaration date.

Calculation: 20,000 shares * $10 per share = $200,000

Hence, the correct answer is A) $200,000. This is reflective of the stock's market value on the specific date the dividend was declared by Lucid Company.