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Adams Moving and Storage, a family-owned corporation, declared a property dividend of 1,000 shares of GE common stock that Adams had purchased in February for $37,000 as an investment. GE’s shares had a market value of $35 per share on the declaration date. Prepare the journal entries to record the property dividend on the declaration and payment dates.

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Answer:

      General Journal                  Debit        Credit

1.     Loss on investment            $2,000

       [$37,000 - (1000 * $35)]    

              Investment in GE stock                $1,600

2.     Retained earnings             $35,000

        (1000 * $35)

             Property dividends payable          $35,000

3.     Property dividends payable $35,000

              Investment in GE stock                 $35,000