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ABC Corp. reports the following balances as of January 1, 2010: Ordinary share capital, P25 par, 2,000 shares outstandingP50,
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Answer #1
Date Account Titles and Explanation Debit Credit
Mar. 15 Retained earnings 10000
Dividends payable (2000 x P5) 10000
(To record the declaration of cash dividends)
Mar. 31 No journal entry required
Apr. 15 Dividends payable 10000
Cash 10000
(To record the distribution of cash dividends)
Jul. 15 Investment in Pentagon Corp. 10000
Gain on appreciation [2000 x (P25 - P20 )] 10000
(To record investment at fair value)
Jul. 15 Retained earnings (2000 x $25) 50000
Dividends payable 50000
(To record the declaration of property dividend)
Distribution Dividends payable 50000
Date (not Investment in Pentagon Corp. 50000
given) (To record distribution of property dividend)
Oct. 15 Retained earnings (30% x 2000 x P25) 15000
Ordinary share capital Dividend Distributable 15000
(To record the declaration of stock dividends)
Nov. 15 No journal entry required
Dec. 1 Ordinary share capital Dividend Distributable 15000
Ordinary share capital 15000
(To record the distribution of stock dividends)

Note: In case of a large stock dividend (more than 20 to 25%), the par value of the shares being issued is transferred from the retained earnings to the paid-in capital section of stockholders' equity unlike a small stock dividend where the market value of the shares being issued is transferred.

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