HAND-OUT ON PROPERTY DIVIDENDS

Sample Company, a real estate developer, is owned by five founding shareholders.

On December 1, 2012, the company declared a property dividend of a onebedroom flat for each shareholder. The property dividend is payable on January
31, 2013.
On December 1, 2012, the carrying amount of a one-bedroom flat is P1,000,000 and
the fair value is P1,500,000. However, the fair value is P1,800,000 on December
31, 2012 and P1,900,000 on January 31, 2013.
Related journal entries:
12/01/2012 Retained Earnings (5 X 1,500,000)
Dividend Payable

7,500,000
7,500,000

12/31/2012 Retained Earnings [(5 X 1,800,000)-7,500,000]1,500,000

Dividend Payable
1,500,000
1/31/2013

Retained Earnings [(5 X 1,900,000) 9,000,000]500,000

Dividend Payable
500,000
Dividend Payable
9,500,000
Inventory (5 x 1,000,000)
5,000,000
Gain on Distribution of Property Dividend
4,500,000

On November 1, 2012, Sample Company declared a property dividend of equipment

payable on March 1, 2013. The carrying amount of the equipment is P3,000,000
and the fair value is P2,500,000 on November , 2012. However, the fair value less
cost to distribute the equipment is P2,200,000 on December 31, 2012 and
P2,000,000 on March 1, 2013.
Related journal entries:
11/01/2012 Retained Earnings
Dividend Payable
12/31/2012 Dividend payable
Retained Earnings
Impairment loss
Equipment
03/01/2013 Dividend Payable
Retained Earnings
Dividend Payable
Loss on Distribution of Property Dividend
Equipment

2,500,000
2,500,000
300,000
300,000
800,000
800,000
200,000
200,000
2,000,000
200,000
2,200,000