Kadoka, Inc. has an investment on its balance sheet for Pierre Corp., with a book value of $54.6 million. Kadoka has decided to divest itself of 60% of its Pierre investment. To accomplish this, Kadoka will distribute 1 share of Pierre stock for every 5 shares of Kadoka stock as a dividend to existing Kadoka shareholders.
a. What kind of equity carve-out is Kadoka, Inc. planning?
b. What is the effect on the Kadoka, Inc. balance sheet of this spin-off?
c. What is the effect on the Kadoka, Inc. income statement of this spin-off in the current period?

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The Answer of Kadoka, Inc. has an investment on its balance sheet for Pierre Corp., with a book value of $54.6 million. Kadoka has decided to divest itself of 60% of its Pierre investment. To accomplish this, Kadoka will distribute 1 share of Pierre stock for every 5 shares of Kadoka stock as a dividend to existing Kadoka shareholders.
a. What kind of equity carve-out is Kadoka, Inc. planning?
b. What is the effect on the Kadoka, Inc. balance sheet of this spin-off?
c. What is the effect on the Kadoka, Inc. income statement of this spin-off in the current period?