180,000 / 20,000 = $9 purchase price per share
$14 - $9 = $5 net reduction in retained earnings per share
180,000 / 10 = 18,000 shares of Torrey Corp. issued
18,000 x $5 = $90,000 net reduction in retained earnings
Baden Corporation owned 20,000 shares of Torrey Corporation’s $5 par value common stock. These shares were purchased in 2004 for $180,000. On September 15, 2008, Baden declared a property dividend of one share of Torrey for every ten shares of Baden held by a stockholder. On that date, when the market price of Torrey was $14 per share, there were 180,000 shares of Baden outstanding. What NET reduction in retained earnings would result from this property dividend?
a. $ 90,000
b. $ 252,000
c. $ 72,000
d. $ 162,000
Please explain why you come up with the answer. Thank you so much
