Chapter 18, Problem 18.11P

Stock dividends received on investments; integrative problem

• LO18–8

Ellis Transport Company acquired 1.2 million shares of stock in L&K Corporation at $44 per share. They are classified by Ellis as “available for sale.” Ellis sold 200,000 shares at $46, received a 10% stock dividend, and then later in the year sold another 100,000 shares at $43.

Hint: There is no entry for the stock dividend, but a new investment per share must be calculated for use later when the shares are sold.

Required:

Prepare journal entries to record these transactions.