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12 August, 00:50

Adams Moving and Storage, a family-owned corporation, declared a property dividend of 1,000 shares of GE common stock that Adams had purchased in February for $37,000 as an investment. GE's shares had a market value of $35 per share on the declaration date. Prepare the journal entries to record the property dividend on the declaration and payment dates. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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  1. 12 August, 02:02
    0
    1. Journal entries

    Dr Loss on investment $2,000

    Cr Investment in GE stock $2,000

    2.

    Dr Retained earnings

    ($1,000*35) $35,000

    Cr Property dividends payable $35,000

    3.

    Dr Property dividends payable $35,000

    Cr Investment in GE stock $35,000

    Explanation:

    Adams Moving and Storage

    1. Journal entries

    Dr Loss on investment $2,000

    Cr Investment in GE stock $2,000

    2.

    Dr Retained earnings

    ($1,000*35) $35,000

    Cr Property dividends payable $35,000

    3.

    Dr Property dividends payable $35,000

    Cr Investment in GE stock $35,000

    Declaration date:Loss on investment ($37,000 - $35,000) = $2,000

    Retained earnings (1,000 shares at $35 per share) = $35,000
  2. 12 August, 02:42
    0
    Given:

    Number of shares: 1,000 Market value : $35 Investment: $37,000

    1. Lost on the investment:

    Number of share*Market price - Investment:

    = $1000*35 - $37,000 = $2000

    1. Loss on Investment A/c Dr $2000

    To GE shares investment A/c $2000

    (Being the adjustment is recorded)

    3. Retain earning:

    Number of share*Market price

    = $1000*35 = $35,000

    Retained earnings A/c Dr $35,000

    To Property Dividends Payable $35,000

    (Being the entry is made on declaration date)

    3. Property dividend

    Property Dividends Payable A/c $35,000

    To GE shares investment A/c $35,000

    (record the property dividend on the declaration and payment dates)
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