Question

On January 1, 2016, Gerlach Inc. had the following account balances in its shareholders' equity accounts....

On January 1, 2016, Gerlach Inc. had the following account balances in its shareholders' equity accounts.

  Common stock, $1 par, 259,000 shares issued 259,000
  Paid-in capital - excess of par, common 518,000
Paid-in capital - excess of par, preferred 145,000
  Preferred stock, $100 par, 14,500 shares outstanding 1,450,000
  Retained earnings 2,900,000
  Treasury stock, at cost, 5,900 shares 29,500

During 2016, Gerlach Inc. had several transactions relating to common stock.

January 15:

Declared a property dividend of 100,000 shares of Slowdown Company (book value $10.9 per share, market value $9.45 per share).

February 17:

Distributed the property dividend.

April 10:

A 2-for-1 stock split was declared and distributed on outstanding common stock and effected in the form of a stock dividend. The market value of the stock was $4 on this date. Hint: Debit Retained earnings.

July 18:

Declared and distributed a 3% stock dividend on outstanding common stock; market value per share, $5.

December 1:

Declared a 50 cents per share cash dividend on the outstanding common shares.

December 20:

Paid the cash dividend.

Required:

Record the above transactions and events in journal entry format. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Homework Answers

Answer #1
Date Account Title Debit Credit
$ $
January 15 Loss on investment in available-for-sale securities 145,000
Investment in available-for-sale securities [($10.9 - 9.45) x 100000] 145,000
Retained earnings (100000 x 9.45) 945,000
Property dividends payable 945,000
February 17 Property dividends payable 945,000
Investment in available-for-sale securities 945,000
April 10 No entry required
July 18 Retained earnings (518000 x 3% x 5) 77,700
Common stock dividends distributable (518000 x 3% x 1) 15,540
Paid in capital - excess of par, common 62,160
Common stock dividends distributable 15,540
Common stock 15,540
December 1 Retained earnings[(518000 - 15540) x 0.5] 251,230
Dividends payable 251,230
December 20 Dividends payable 251,230
Cash 251,230
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