Indigo Inc. owns shares of Sweet Corporation stock. At December 31, 2017, the se
ID: 2550604 • Letter: I
Question
Indigo Inc. owns shares of Sweet Corporation stock. At December 31, 2017, the securities were carried in Indigo’s accounting records at their cost of $773,000, which equals their fair value. On September 21, 2018, when the fair value of the securities was $1,287,000, Indigo declared a property dividend whereby the Sweet 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.)
Date
Account Titles and Explanation
Debit
Credit
(To record gain or loss)
(To record property dividend)
Date
Account Titles and Explanation
Debit
Credit
Sep. 21Oct. 8Oct. 23
(To record gain or loss)
(To record property dividend)
Sep. 21Oct. 8Oct. 23
Sep. 21Oct. 8Oct. 23
Explanation / Answer
Date Account Titles and Explanation Debit Credit Sep. 21 Investment in Sweet Corporation 514000 Gain on appreciation ($1287000 - $773000) 514000 (To record gain on investment) Sep. 21 Retained earnings 1287000 Dividends payable 1287000 (To record declaration of property dividend) Oct. 8 No Entry 0 No Entry 0 Oct. 23 Dividends payable 1287000 Investment in Sweet Corporation 1287000 (To record distribution of property dividend)