Question

Sage Inc. owns shares of Pronghorn Corporation stock. At December 31, 2020, the securities were carried in Sage’s accounting records at their cost of $1,030,000, which equals their fair value. On September 21, 2021, when the fair value of the securities was $1,397,000, Sage declared a property dividend whereby the Pronghorn securities are to be distributed on October 23, 2021, to stockholders of record on October 8, 2021.

Prepare all journal entries necessary on those three dates.

Answer 1

The Journal entry was recorded for Sage Inc, in the explanation section below

Step-by-step explanation:

Journal Entries

Date Account Title and Debit $ Credit $

Explanation

21st Sept-21 Equity Investments

( $1,397,000- $1,030,000,) $367,000

To unrealized holding gain

or loss $367,000

21st Sept-21 The retained earnings $1,397,000

To Property Dividends payable $1,397,000

08- Oct-21 No entry

23- Oct-21 Property Dividends payable $1,397,000

To Equity Investments $1,397,000