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Malvern Corporation owns 15,000 shares of Wallace Company's common stock with a cost of $690,000. These...

Malvern Corporation owns 15,000 shares of Wallace Company's common stock with a cost of $690,000. These shares are used in a property dividend distribution to the stockholders of Malvern. The property dividend is declared on May 25 and is scheduled to be distributed on July 31 to the stockholders of record on June 15. The fair value per share of Wallace's stock is $50 on May 25; $52 on June 15; and $54 on July 31. Prepare all the necessary journal entries on May 25, June 15, and July 31, for the declaration and distribution of the Wallace Company stock to the stockholders of Malvern.

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Answer #1
Date Account Titles and Explanation Debit Credit
May-25 Investment in Wallace Company 60000
Gain on appreciation [(15000 x $50) - $690000] 60000
(To record investment at fair value)
May-25 Retained earnings 750000
Dividends payable 750000
(To record declaration of property dividend)
Jun-15 No journal entry required
Jul-31 Dividends payable 750000
Investment in Wallace Company 750000
(To record distribution of property dividend)
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