Adams Moving and Storage, a family-owned corporation, declared a property divide

Question

Adams Moving and Storage, a family-owned corporation, declared a property dividend of 2,000 shares of GE common stock that Adams had purchased in February for $84,000 as an investment. GE’s shares had a market value of $40 per share on the declaration date.

Prepare the journal entries to record the property dividend on the declaration and payment dates.

1. Record adjustment of stock to fair value

2. Record the journal entry on the declaration date

3. Record the journal entry on the payment date

Adams Moving and Storage, a family-owned corporation, declared a property dividend of 2,000 shares of GE common stock that Adams had purchased in February for $84,000 as an investment. GE’s shares had a market value of $40 per share on the declaration date.

Prepare the journal entries to record the property dividend on the declaration and payment dates.

1. Record adjustment of stock to fair value

2. Record the journal entry on the declaration date

3. Record the journal entry on the payment date

Explanation / Answer

1) Adjustment of stock to fair value:- 2000 shares x 40 = $ 80000

Journal Entry: Loss on Investment ---------------------------------------Dr 4000

Investment in shares of GE Common Stock Cr 4000

2) Journal Entry on the declaration date

Retained Earnings --------------------------------------------------------------Dr 80000

Property Dividends Payable Cr 80000

3) Journal Entry on the Payment Date

Property Dividends Payable -------------------------------------------------------Dr 80000

Investment in shares of GE Common Stock Cr 80000

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