Subsidiary Company S had the following stockholders equity on December 31, 2013, prior to distributing a 10 stock dividend Common stock ($1par), 100,000 shares issued and outstanding $ 100,000 Paid in capital in excess of par 1,900,000 Retained earnings 2,000,000 Total equity $4,000,000 The fair va...

The stock dividend will result in the following entr ...

Subsidiary Company S had the following stockholders equity on December 31, 2013, prior to distributing a 10%

Question:

Subsidiary Company S had the following stockholders’ equity on December 31, 2013, prior to distributing a 10% stock stock ($1par), 100,000 shares issued and outstanding....... $ 100,000
Paid-in capital in excess of par ............... 1,900,000
Retained earnings .................... 2,000,000
Total equity ...................... $4,000,000
The fair value of the shares distributed is $50 each. What is the effect of this on the subsidiary equity, the investment account, and the December 31, 2013, elimination procedures? Assume the parent uses the simple equity method to account for its investment in the subsidiary.
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...