Question

Ayayai Inc. owns shares of Pina Corporation stock. At December 31, 2017, the securities were carried in Ayayai’s accounting records at their cost of $789,000, which equals their fair value. On September 21, 2018, when the fair value of the securities was $993,000, Ayayai declared a property dividend whereby the Pina securities are to be distributed on October 23, 2018, to stockholders of record on October 8, 2018. Prepare all journal entries necessary on those three dates. (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.)

Answer 1

Answer:

Explanation:

The journal entries are shown below:

On  September 21, 2018:

Equity Investments A/c Dr $204,000

       To Unrealized Holding Gains $204,000

(Being unrealized holding gain is recorded)

The unrealized holding gain

= Fair value of  the securities - cost value

= $993,000 - $789,000

= $204,000

Retained Earnings A/c Dr  $993,000

    To Property Dividends Payable  $993,000

(Being property dividend recorded)

On  October 8, 2018:

No entry

On October 23, 2018

Property Dividends Payable A/c Dr $993,000

    To Equity investment                               $993,000

(Being property dividend distribution is  recorded)