ZIP Company owns 33,000 common shares of PIK Company. ZIP decided to divest itself of this investment by distributing the PIK shares in the form of a real estate dividend. The dividend ratio is one PIK share for every four ZIP common shares held by shareholders. ZIP has 132,000 common shares outstanding. On April 15, 2016, the reporting date, PIK shares had a par value of $5 per share, a book value of $11.3 per share, and a market value of $16.3 per share.

Required:

Prepare the necessary journal entries. Shares were distributed on May 15, 2016 to shareholders of record on May 1, 2016

Answer rating: 100% (QA)

To divest its investment in PIK Company ZIP Company decided to distribute PIK shares to its sharehol... View the full answer