Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng

تمرين 6

Subsidiary Company S had the following stockholders' equity on December 31, 2013, prior to distributing a 10% stock dividend:
Common stock ($1 par), 100,000 shares issued and outstanding....... $ 100,000
Paid-in capital in excess of par.................................. 1,900,000
Retained earnings............................................ 2,000,000
Total equity............................................... $4,000,000
The fair value of the shares distributed is $50 each. What is the effect of this dividend on the subsidiary equity, the investment account, and the December 31, 2013, elimination procedures? Assume the parent uses the simple equity method to account for its investment in the subsidiary.