The following data were taken from the balance sheet accounts of Masefield Corpo

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.

Explanation / Answer

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

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