Question

The following data were taken from the balance sheet accounts of Waterway Corporation on De 31, 2016 $578,000 686,000 454,000 152,000 847,000 Current assets Debt investments Common stock (par value $10) Paid-in capital in excess of par Retained earnings Prepare the required journal entries for the following unrelated items. (Credit account titles a automatically indented when amount is entered. Do not indent manually. If no entry i required, select "No Entry" for the account titles and enter O for the amounts.) (a) A 6% stock dividend is (1) declared and (2) distributed at a time when the market price share is $41 (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, 2017, and paid January 25, 2017, in bonds held as an investment. The bonds have a book value of $101,000 and a fair value of $125,000 No. Date Account Titles and Explanation Debit Credit To record change in value of bonds) (To record the declaration of dividends)

Answer 1

No.	Date	Account Titles and Explanation	Debit	Credit
(a)(1)		Retained earnings (45400 x 6% x $41)	111684
		Common stock dividend distributable (45400 x 6% x $10)		27240
		Paid-in capital in excess of par-common		84444
(a)(2)		Common stock dividend distributable	27240
		Common stock		27240
(b)		No Entry	0
		No Entry		0
(c)	Jan 5, 2017	Investment in Bonds	24000
		Gain on appreciation of investment ($125000 - $101000)		24000
		(To record change in value of bonds)
		Retained earnings	125000
		Property dividends payable		125000
		(To record the declaration of dividends)
	Jan 25, 2017	Property dividends payable	125000
		Investment in Bonds		125000
		(To record the payment of dividends)

Note – For stock split, no entry is recorded but only a memorandum note is made to indicate that par value has been reduced from $10 to $2 per share, and the shares outstanding are now 227,000 (45,400 shares x 5).