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On January 2, year 2, Lake Mining Co.’s board of directors
declared a cash dividend of $400,000 to stockholders of record
on January 18, year 2, payable on February 10, year 2. The dividend
is permissible under law in Lake’s state of incorporation.
Selected data from Lake’s December 31, year 1 balance sheet are
as follows:

Accumulated depletion $100,000

Capital stock 500,000

Additional paid-in capital 150,000

Retained earnings 300,000

The $400,000 dividend includes a liquidating dividend of