Pierson Corporation owned 10,000 shares of Hunter Corporation. These shares were purchased in 2007 for $90,000. On November 15, 2011, Pierson declared a property dividend of one share of Hunter for every ten shares of Pierson held by a stockholder. On that date, when the market price of Hunter was $14 per share, there were 90,000 shares of Pierson outstanding. What gain and net reduction in retained earnings would result from this property dividend?
Gain Net Reduction in
Retained Earnings
a. $0 $126,000
b. $0 $ 81,000
c. $45,000 $ 81,000
d. $45,000 $ 36,000