Accounting Help?

Question

On January 1, 2008, Deweese Corporation had $1,000,000 of common stock outstanding that was issued at par. It also had retained earnings of $750,000. The company issued 40,000 shares of common stock at par on July 1 and earned net income of $400,000 for the year.

Instructions

Journalize the declaration of a 15% stock dividend on December 10, 2008, for the following independent assumptions. (List multiple debit/credit entries in descending order of amount.)

1.

Par value is $10, and market value is $18.
2.

Par value is $5, and market value is $20.

Debit Credit
1. Retained earnings
Common stock dividends distributable
Paid-in cap in excess of par value
2. Retained earnings
Paid-in cap in excess of par value
Common stock dividends distributable

Answer 1

Stock splits do not require a journal entry, stock dividends do. Even though the total amount of stockholders' equity remains the same, a stock dividend requires a journal entry to transfer an amount from the retained earnings section of the balance sheet to the paid-in capital section of the balance sheet.

1. Par value is $10, and market value is $18
The co. had 140,000 shares of common stock to start with. 15% stock dividend will result in 21,000 new shares

Dr Retained earnings 378,000 (new shares x mkt value)
Cr Common stock dividends distributable 210,000 (new shares x par value)
Cr Paid-in cap in excess of par value 168,000

2. Par value is $5, and market value is $20
The co. had 240,000 shares of common stock to start with. 15% stock dividend will result in 36,000 new shares

Dr Retained earnings 720,000
Cr Paid-in cap in excess of par value 540,000
Cr Common stock dividends distributable 180,000

Answer 2

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Answer 3

Hmmm, a stock divident doesn't result in a journal entry. It is similar to a stock split. You would get 115 shares for every 100 shares you own but it just results in an increase in shares outstanding, not any change to general ledger accounts.

Answer 4

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Answer 5

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