Question

The following data were taken from the balance sheet accounts of Culver Corporation on December 31, 2019.

Current assets		$550,000
Debt investments (trading)		685,000
Common stock (par value $10)		503,000
Paid-in capital in excess of par		145,000
Retained earnings		861,000

Prepare the required journal entries for the following unrelated items. (Credit account titles are automatically indented when amount is entered. Do not indent manually. 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 $35.
(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, 2020, and paid January 25, 2020, in bonds held as an investment. The bonds have a book value of $93,000 and a fair value of $139,000.

Answer 1

Date	Particulars	Debit	Credit
A	Retained earnings account (50300 × 5% × 35)	88025
	Common stock (50,300 × 5% × 10)		25150
	Paid in capital excess of par		62875
	(Issued 5% stock dividend)
B (1)	Common stock ($10) (503000 + 25150)	528150
	Common stock ($2)		528150
	(Par value of common stock changed from 5 to 2) (Its just memo entry. Student can choose not to pass entry)

B(2)	Common stock ($2)	528150
	Common stock ($10)		528150
	(Stock split 5 for 1) (student can choose not to pass entry)
January 5 2020	Interest receivable	xxx
	Interest Income		xxx
	(Interest income on bond realised)
January 25 2020	Cash	xxx
	Interest receivable		xxx
	(Interest on bond received)

Note - For B. You can also choose "No entry required" as its ultimate effect is zero.

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