Adams Moving and Storage, a family-owned corporation, declared a property dividend of 1,000 shares of GE common stock that Adams had purchased in February for $37,000 as an investment. GE's shares had a market value of $35 per share on the declaration date. Prepare the journal entries to record the property dividend on the declaration and payment dates. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Given:

Number of shares: 1,000 Market value : $35 Investment: $37,000

1. Lost on the investment:

Number of share*Market price - Investment:

= $1000*35 - $37,000 = $2000

1. Loss on Investment A/c Dr $2000

To GE shares investment A/c $2000

(Being the adjustment is recorded)

3. Retain earning:

Number of share*Market price

= $1000*35 = $35,000

Retained earnings A/c Dr $35,000

To Property Dividends Payable $35,000

(Being the entry is made on declaration date)

3. Property dividend

Property Dividends Payable A/c $35,000

To GE shares investment A/c $35,000

(record the property dividend on the declaration and payment dates)

1. Journal entries

Dr Loss on investment $2,000

Cr Investment in GE stock $2,000

2.

Dr Retained earnings

($1,000*35) $35,000

Cr Property dividends payable $35,000

3.

Dr Property dividends payable $35,000

Cr Investment in GE stock $35,000

Explanation:

Adams Moving and Storage

1. Journal entries

Dr Loss on investment $2,000

Cr Investment in GE stock $2,000

2.

Dr Retained earnings

($1,000*35) $35,000

Cr Property dividends payable $35,000

3.

Dr Property dividends payable $35,000

Cr Investment in GE stock $35,000

Declaration date:Loss on investment ($37,000 - $35,000) = $2,000

Retained earnings (1,000 shares at $35 per share) = $35,000