An investment in marketable securities was distributed to shareholders as a property dividend. The dividend should be recorded at the
A) fair value of the asset transferred or the book value of the asset transferred, whichever is higher.
B) fair value of the asset transferred or the book value of the asset transferred, whichever is lower.
C) fair value of the asset transferred.
D) book value of the asset transferred.

Question

Quizplus · Accepted Answer

When a marketable security is distributed to shareholders as a property dividend, it should be recorded at its fair value at the date of distribution. The book value would not reflect the market value of the asset, and recording it at a higher or lower amount would not accurately reflect the transaction. Therefore, the fair value of the asset transferred is the appropriate amount to record the dividend.

An Investment in Marketable Securities Was Distributed to Shareholders as a Property