On October 1, 2010, Black Company declared a property dividend payable in the form of marketable equity securities classified as "available for sale" for financial accounting purposes.The marketable equity securities will be distributed to the common stockholders on December 1, 2010.The investment in equity securities originally cost Black $410, 000 on August 1, 2010.The investment's fair value on various dates is as follows: $\begin{array}{ll}
\text { October } 1,2010 & \$ 430,000 \
\text { December } 1,2010 & 435,000 \
\text { December } 31,2010 & 440,000
\end{array}$
The amount credited to Realized Gain on Disposal of Investments resulting from this dividend transaction should be

Question

On October 1, 2010, Black Company declared a property dividend payable in the form of marketable equity securities classified as "available for sale" for financial accounting purposes.The marketable equity securities will be distributed to the common stockholders on December 1, 2010.The investment in equity securities originally cost Black $410, 000 on August 1, 2010.The investment's fair value on various dates is as follows: $\begin{array}{ll}
\text { October } 1,2010 & \$ 430,000 \
\text { December } 1,2010 & 435,000 \
\text { December } 31,2010 & 440,000
\end{array}$
 The amount credited to Realized Gain on Disposal of Investments resulting from this dividend transaction should be

Quizplus · Accepted Answer

The amount credited to Realized Gain on Disposal of Investments resulting from this dividend transaction is the difference between the fair value of the securities on the declaration date (October 1, 2010) and their original cost. According to the table provided, the fair value on October 1, 2010 was $430,000, which results in a realized gain of $20,000 ($430,000 - $410,000). Therefore, the correct answer choice is B, $20,000.