Question

On January 1, 2018, Celtics Inc. had the following account balances in its equity accounts.

Common stock, $1 par, 250,000 shares issued	250,000
Paid-in capital–excess of par, common	500,000
Retained earnings	2,000,000
Treasury stock, at cost, 5,000 shares	25,000

During 2018, Celtics Inc. had several transactions relating to common stock.

1/15	Declared a property dividend of 100,000 shares of Big3 Company (book value $10 per share, fair value $9 per share).
2/17	Distributed the property dividend.
4/10	A 2-for-1 stock split was declared and distributed on outstanding common stock and effected in the form of a stock dividend. The fair value of the stock was $4 on this date.
7/18	Declared and distributed a 3% stock dividend on outstanding common stock; fair value per share, $5.
12/1	Declared a 50 cents per share cash dividend on the outstanding common shares.
12/20	Paid the cash dividend.

Required: Record the above transactions and events in journal entry format.

Answer 1

Answer

Date	Particulars	Dr. $	Cr. $
15-Jan	Loss on Investment in Big3 Company (100,000 Shares * $1)	1,00,000.00
	Investment in Big3 Company		1,00,000.00
	(Being loss recorded)
15-Jan	Retained Earnings (100,000 Shares * $9)	9,00,000.00
	Property Dividend Payable		9,00,000.00
	(Being property dividend recorded)
17-Feb	Property Dividend Payable	425.00
	Investment in Big3 Company		425.00
	(Being property dividend adjusted)
10-Apr	No entry will be there as Stock split only effect no. of shares, no account is changed due to this
18-Jul	Retained Earnings {(250,000 * 2) * 3% * $5)	75,000.00
	Common Stock {(250,000 * 2) * 3% * $1)		15,000
	Paid-In-Capital in excess of Par--Common {(250,000 * 2) * 3% * $4)		60,000
	(Being stock dividend recorded on 500,000 Shares i.e. after stock split)
1-Dec	Retained Earnings (Note 1)	257,500.00
	Dividend Payable		257,500.00
	(Being dividend declared)
8-Jul	Dividend Payable	257,500.00
	Cash		257,500.00
	(Being dividend paid)

Note

No. of Shares = After Split shares + Stock Dividend

After Split = 250,000 Shares * 2 = 500,000 Shares

Stock Dividend = 500,000 Shares * 3% = 15,000

Shares for Cash Dividend = 515,000 (500,000 + 15,000)

Cash Dividend = 515,000 Shares * $0.5 per shares

Cash Dividend = $257,500

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