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On January 1, 2020, Nun Company had ordinary and preference shares outstanding. The incorporators or original shareholders own ten ordinary shares but no preference shares.

On January 1, 2020, Nun Company had ordinary and preference shares outstanding. The incorporators or original shareholders own ten ordinary shares but no preference shares.

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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What amount is credited to Retained Earnings upon settlement if the shareholders have chosen the cash alternative?
On January 1, 2020, Nun Company had ordinary and preference shares outstanding. The incorporators or original shareholders own ten ordinary shares but no preference shares. On December 31, 2020, the entity declared dividends on the ordinary shares payable on July 1, 2021. The entity decided to give the ordinary shareholders a choice between receiving a cash dividend of P500,000 per share or a property dividend in the form of a noncash asset. The noncash asset is a standard model from the car fleet. Each car has a fair value of P600,000 and carrying amount of P400,000. The entity estimated that 80% of the ordinary shareholders will take the option of the cash dividend and 20% will elect for the noncash asset.
Transcribed Image Text:On January 1, 2020, Nun Company had ordinary and preference shares outstanding. The incorporators or original shareholders own ten ordinary shares but no preference shares. On December 31, 2020, the entity declared dividends on the ordinary shares payable on July 1, 2021. The entity decided to give the ordinary shareholders a choice between receiving a cash dividend of P500,000 per share or a property dividend in the form of a noncash asset. The noncash asset is a standard model from the car fleet. Each car has a fair value of P600,000 and carrying amount of P400,000. The entity estimated that 80% of the ordinary shareholders will take the option of the cash dividend and 20% will elect for the noncash asset.
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