On 1 March 2014, Parkinson Company originally issued 10 000 ordinary shares at $4.00 per share. On 1 March 2013, Parkinson distributed a 12% share dividend; the market price at that time had dropped to $3.75 per share. Parkinson must record a loss of $300.

Question

Quizplus · Accepted Answer

A share dividend does not involve a cash transaction and does not result in a gain or loss. It is a distribution of additional shares to shareholders, and the company records it by transferring an amount from retained earnings to paid-in capital.

On 1 March 2014, Parkinson Company Originally Issued 10 000