Question

The following data were taken from the balance sheet accounts of Masefield Corporation on December 31, 2013.
Current assets $541,000
Debt investments 655,000
Common stock (par value $10) 660,000
Paid-in capital in excess of par 153,500
Retained earnings 869,000
Prepare the required journal entries for the following unrelated items. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
(a) A 5% stock dividend is (1) declared and (2) distributed at a time when the market price per share is $32.
(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, 2014, and paid January 25, 2014, in bonds held as an investment. The bonds have a book value of $94,020 and a fair value of $126,720.

Answer 1

Answer: Please see below for answers

Explanation:

Current assets      $541,000

Debt investments    655,000

Common stock (par value $10) 660,000

Paid-in capital in excess of par 153,500

Retained earnings        869,000

calculations

a) A 5% stock dividend is (1) declared and (2) distributed at a time when the market price per share is $32.

Common stock (par value $10) 660,000

Retained earning = 660,000 x 5% x $32 = $1,056,000

common stock dividend distributed =660,000 x 5%x $10= $330,000

c) Debt Investment  from bond with book value $94,020 and $126,720 fair value = $126,720 -- $94,020 = $32,700

Journal  entries

a) Account Particulars                        Debit               Credit

Retained earning                       $1,056,000

common stock dividend distributable                        $330,000

Paid-in Capital in Excess of Par

( $1,056,000-$330,000)                                               $726,000

Common stock dividend distributable     $330,000

common stock                                                                 $330,000

b.No entry  instead for the stock split  0f 5 to 1,  a memo entry to record  that the number of shares and par value per share  has changed is created.

 

journal to record dividend  declared January 5, 2014, January 5, 2014,

c) Investment Bonds                            $32,700

Gain on appreciation of Investments (Bonds)                  $32,700

Retained Earnings                                  $126,720.

Property Dividends Payable                                            $126,720.

 Journal to record dividend  paid  January 25, 2014,

Property Dividends Payable                    $126,720.

investment bonds                                                           $126,720