On November 1, 2014, the Cranberry 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, 2014. The bonds to be distributed to the common stockholders originally cost Cranberry $210,000. Fair value of the bonds on various dates is as follows:
Which one of the following amounts should be used to record the appropriate credit to Property Dividends Payable?

Question

On November 1, 2014, the Cranberry 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, 2014. The bonds to be distributed to the common stockholders originally cost Cranberry $210,000. Fair value of the bonds on various dates is as follows:  
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 November 1, 2014, is not provided in the question. Therefore, we cannot use $210,000 (original cost) or any other value before that date. The fair value of the bonds on December 15, 2014, is also not relevant since the property dividend was declared on November 1, 2014, and will be distributed on December 15, 2014. Thus, we should use the fair value of the bonds on November 1 or shortly thereafter. The only fair value given near that date is $235,000 on November 5, 2014. Therefore, we should use $235,000 to record the appropriate credit to Property Dividends Payable.

On November 1, 2014, the Cranberry Construction Company Declared a Property