Pronghorn Inc. owns shares of Stellar Corporation stock. At December 31, 2017, the securities...

Question:

Pronghorn Inc. owns shares of Stellar Corporation stock. At December 31, 2017, the securities were carried in Pronghorn's accounting records at their cost of $845,000, which equals their fair value. On September 21, 2018, when the fair value of the securities was $1,249,000, Pronghorn declared a property dividend whereby the Stellar securities are to be distributed on October 23, 2018, to stockholders of record on October 8, 2018. Prep journal entries necessary on those three dates.

Dividend:

A share of the earnings of the company, which are distributed as rewards among its shareholders, is known as a dividend. The rates of dividends are managed by the board of directors and get approved by the shareholders with the help of voting.

Answer and Explanation:

Date Account Title and Explanation Debit ($) Credit ($)
September 21, 2018 Equity Investment ($1,249,000 - $845,000) $404,000
Unrealized holding gain $404,000
(To record unrealized holding gain)
September 21, 2018 Retained earnings $1,249,000
Property dividend payable $1,249,000
(To record property dividend payable)
October 8, 2018 No entry
October 23, 2018 Property dividend payable $1,249,000
Equity investments $1,249,000
(To record distribution of dividend)

Learn more about this topic:

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Impact of Dividend Distribution on Retained Earnings

from Accounting 302: Advanced Accounting

Chapter 12 / Lesson 2
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