Dividend Policy Paper 7


Stock dividends on common stock should be recorded at their fair value by the investor when the related investment is accounted for under which of the following methods?
Fair value


On March 4, year 1, Evan Co. purchased 1,000 shares of LVC common stock at $80 per share. On September 26, year 1, Evan received 1,000 stock rights to purchase an additional 1,000 shares at $90 per share. The stock rights had an expiration date of February 1, year 2. On September 30, year 1, LVC’s common stock had a market value, ex-rights, of $95 per share and the stock rights had a market value of $5 each. What amount should Evan report on its September 30, year 1 balance sheet as the cost of its investment in stock rights?


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