For each of the following independent transactions a through d, prepare the nece

Question

For each of the following independent transactions a through d, prepare the necessary journal entry (if necessary):

(a) declared and paid a $0.40 per share cash dividend on 200,000 shares of preferred stock outstanding. (b) declared and distributed a 10% stock dividend on 800,000 shares of $5 par value common stock outstanding. Market price per common share on this date was $25.

(c) declared and distributed a 2-for-1 stock split on 500,000 shares of $10 par value common stock outstanding.

(d) declared and distributed a 30% stock dividend on 400,000 common shares of $5 par value common stock outstanding. Market price per common share on this date was $20.

Accounts

Debits

credits

a.

b.

c.

d.

Accounts

Debits

credits

a.

b.

c.

d.

Explanation / Answer

a) 0.40 x 200,000 = 80000 Retained Earnings (or Cash Dividends) Dr. 80000 Dividends Payable Cr. 80,000 b) 800000 x 10% x 25 = 2000000 Retained Earnings (or Stock Dividends) 2000000 Common Stock Cr. (800,000 x 10% x 5) 400000 Paid-In Capital in Excess of Par Cr. 1600000 c) No journal entry will be passed. d) 400,000 x 30% x 5 = 600000 Retained Earnings (or Stock Dividends) Dr 600000 Common Stock Cr 600000

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