On November 1, 2010, the Metal Construction Company declared a property dividend payable in the form of bonds held for long-term investment purposes.The bonds will be distributed to the common stockholders on December 15, 2010.The bonds to be distributed to the common stockholders originally cost Metal $210, 000.Fair value of the bonds on various dates is as follows: $\begin{array}{ll}
\text { December } 31,2009 & \$ 220,000 \
\text { November } 1,2010 & 225,000 \
\text { December } 15,2010 & 230,000
\end{array}$
Which one of the following amounts should be used to record the appropriate credit to Property Dividends Payable?

Question

On November 1, 2010, the Metal Construction Company declared a property dividend payable in the form of bonds held for long-term investment purposes.The bonds will be distributed to the common stockholders on December 15, 2010.The bonds to be distributed to the common stockholders originally cost Metal $210, 000.Fair value of the bonds on various dates is as follows: $\begin{array}{ll}
\text { December } 31,2009 & \$ 220,000 \
\text { November } 1,2010 & 225,000 \
\text { December } 15,2010 & 230,000
\end{array}$
 Which one of the following amounts should be used to record the appropriate credit to Property Dividends Payable?

Quizplus · Accepted Answer

The fair value of the bonds on the declaration date should be used to record the appropriate credit to Property Dividends Payable. According to the information provided, the fair value of the bonds on November 1, 2010, was $225,000, which is the amount that should be recorded. Option A is incorrect because it represents the original cost of the bonds, not their fair value. Option B and D are also incorrect because they do not reflect the fair value of the bonds on the declaration date.

On November 1, 2010, the Metal Construction Company Declared a Property