For each of the following independent transactions a through d, prepare the nece
ID: 2381762 • Letter: F
Question
For each of the following independent transactions a through d, prepare the necesary journal entry (if necessary):
(a) Declare and paid a $0.40 per share cash dividend on 100,000 shares of preferred stock outstanding.
(b) Declared and distributed a 10% stock dividend on 400,000 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 40% 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
1) declared and paid a $0.40 per share cash dividend on 100,000 shares of preferred stock outstanding.
100,000 x 0.40 = $40,000 dividend
Dr Cash Dividends (or Retained Earnings) 40,000
Cr Cash 40,000
2) Declared and distributed a 10% stock divident on 400,000 shares of $5 par value common stock outstanding. Market price per common share on this date was $25.
400,000 x 10% x 25 = $1,000,000 total amount of dividend
400,000 x 10% x 5 = $200,000 par value of dividend
Dr Stock Dividends (or Retained Earnings 1,000,000
Cr Paid-in Capital in Excess of Par 800,000
Cr Common Stock 200,000
3) Declared and distributed a 2-for-1 stock split on 500,000 shares of $10 par value common stock outstanding.
No journal entry needed. However, a note may be made that the number of shares outstanding is now 1,000,000 and the par value is $5 per share.
4) Declared and distributed a 40% stock dividend on 400,000 common shares of $5 par value common stock outstanding. Market price per common share on this date was $20.
When the stock dividend is more than 20%, only the par value is used.
400,000 x 40% x 5 = $800,000 amount of dividend
Dr Stock Dividends (or Retained Earnings) 800,000
Cr Common Stock 800,000
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