Question

Farmer Corp. owned 20,000 shares of Eaton Corp. purchased in 2009 for $300,000. On December 15, 2012, Farmer declared a property dividend of all of its Eaton Corp. shares on the basis of one share of Eaton for every 10 shares of Farmer common stock held by its stockholders. The property dividend was distributed on January 15, 2013. On the declaration date, the aggregate market price of the Eaton shares held by Farmer was $500,000. The entry to record the declaration of the dividend would include a debit to Retained Earnings of

Answer 1

Answer:

Debited to Retained Earnings of $500,000.

Explanation:

At the time of declaration of the dividend, the journal entry is recorded which is shown below:

Retained earning A/c Dr  $500,000

             To Dividend payable  A/c $500,000

(Being cash dividend declared)

On the declaration date, the dividend amount is recorded. So while recording we debited the retained earning account and credited the dividend payable account

All other information which is given is not relevant. Hence, ignored it