Question

E15.15 (LO 3) (Dividend Entries) The following data were taken from the balance sheet accounts of Masefield Corporation on December 31, 2019.

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 5% 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, 2020, and paid January 25, 2020, in bonds held as an investment. The bonds have a book value of $100,000 and a fair value of $135,000.

Answer 1

Required A :
NO	General Journal	Debit	Credit
a)1)	Retained earnings (50,000 shares * $ 39 *5%)	$ 97,500
	Common stock dividend Distributable (50000 shares*$ 10*5%)		$ 25,000
	Paid in capital in excess of par ($97,500-$ 25,000)		$ 72,500
	(To record Declared 5% stock dividend )
a)2)	Common stock dividend Distributable. (50000 shares*$ 10*5%)	$ 25,000
	Common stock		$ 25,000
	( to record distributed common stock dividend to common stock)

Required B:

No entry

Explanation :

Memorandum note to indicate that par value is to be reduced from $ 10 to $ 2 per share

and now outstanding shares 250,000   shares (50,000 shares * 5 shares)

NO	Date	General Journal	Debit	Credit
C)1)	Jan 5,2020	Investments (Bonds) ($ 135,000 -$ 100,000)	$ 35,000
		Gain on appreciation of investments (Bonds)		$ 35,000
		(To record appreciation of investments )
C)2)	Jan 5,2020	Retained earnings	$ 135,000
		Property Dividends payable		$ 135,000
		(To record declared dividend )
C)3)		Property Dividends payable	$ 135,000
		Investments (Bonds)		$ 135,000
		(To record dividends paid in bonds as investment )