Equity transactions For each of the following independent transactions a through
ID: 2484850 • Letter: E
Question
Equity transactions 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 5% 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 40% stock dividend on 400,000 common shares of $5 par value common stock outstanding. Market price per common share on this date was $20.Explanation / Answer
Date Accounts title Dr Cr a Retained earnings ($.4*200000) 80000 Dividend payable/Preferred Dividend Payable 80000 (Being dividend payable to preferred stock on 20000 shares) Dividend payable/Preferred Dividend Payable 80000 Cash 80000 (being cash paid) b Retained Earnings 1000000 Stock Dividend Distributable (800000*25*5%) 1000000 (Being40000 common stock- stock dividend declared ) Stock Dividend Distributable 1000000 Common Stock (800000*5%*5) 200000 paid in capital in excess of par-Common stock (800000*5%*20) 800000 (being stock dividend distributed) c Memo entry for stock spilt Memorandum- 2 for 1 stock spilt increased the no. of common stock outstanding from 500000 to 1000000 and reduced the par value from $10 to $5 per share No Journal Entry d Retained Earnings (160000*$5) 800000 Stock Dividend Distributable 800000 (Being large stock dividend 400000*40%=160000 stock declared and is at par market price not considered Stock Dividend Distributable 800000 Common stock (160000*5) 800000 in this case for ever 10 shares 4 shares are issued so for 400000 shares 160000 shares are issued
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