Question

The following data were taken from the balance sheet accounts of Masefield Corporation on December 31, 2016.

Current assets

$540,000

Debt investments (trading)

624,000

Common stock (par value $10)

500,000

Paid-in capital in excess of par

150,000

Retained earnings

840,000

Instructions

Prepare the required journal entries for the following unrelated items.

(a)

A 30% stock dividend is declared and distributed at a time when the market price per share is $39.

(b)

The par value of the common stock is reduced to $2 with a 5-for-1 stock split.

(c)

A dividend is declared January 5, 2017, and paid January 25, 2017, in bonds held as an investment. The bonds have a book value of $100,000 and a fair value of $135,000.

Answer 1

No.	Date	Account Titles and Explanation	Debit	Credit
(a) (1)		Retained earnings (50,000*30%*$39)	585,000
		Common Stock Dividend Distributable (50,000*30%*$10)		150,000
		Paid-in capital in excess of par (50,000*30%*$29)		435,000
(a) (2)		Common Stock Dividend Distributable	150,000
		Common Stock		150,000
(b)		No Entry	0
		Simply a memorable note to indicate that par value has been reduced from $10 to $2 per share, and shares outstanding are now 250,000(50,000*5)		0
(c)	Jan. 5, 2017	Investments (Bonds) ($135,000-$100,000)	35,000
		Gain on Appreciation of Investments (Bonds)		35,000
		(To record change in value of bonds)
		Retained earnings	135,000
		Property Dividends Payable		135,000
		(To record the declaration of dividends)
	Jan. 25, 2017	Property Dividends Payable	135,000
		Investments (Bonds)		135,000
**No. of common stock shares = $500,000/$10 = 50,000 shares