Exercise 11-16 On January 1, 2017, Lenne Corporation had $1,200,000 of common st

Question

Exercise 11-16 On January 1, 2017, Lenne Corporation had $1,200,000 of common stock outstanding that was issued at par and retained earnings of $750,000. The company issued 30,000 shares of common stock at par on July 1 and earned net income of $400,000 for the year. Journalize the declaration of a 15% stock dividend on December 10, 2017, for the following two independent assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts) (a) Par value is $10 and market price is $15 (b) Par value is $5 and market price is $8 No. Account Titles and Explanation Debit Credit

Explanation / Answer

Case A Opening Value of Common stock          1,200,000 Par Value                        10 Number of shares as of 1st Jan 2017              120,000 Shares issued on July 1 @ Rs 10                30,000 Total Shares as of 10th December 17              150,000 Value of Shares as of 10th December 2017          1,500,000 Net Income earned (Retained Earnings)              400,000 Stock Dividend to be issued 15% No of shares issued as dividend                22,500 Par Value                        10 Market Price                        15 Value of shares at Par              225,000 Value of shares at Market Value              337,500 Journal Entry : Retained Earnings A/c Dr              337,500 To Common Stock    225,000 To Paid up Capital in Excess of Par Value    112,500 Case B Opening Value of Common stock    1,200,000 Par Value                    5 Number of shares as of 1st Jan 2017       240,000 Shares issued on July 1 @ Rs 10          30,000 Total Shares as of 10th December 17       270,000 Value of Shares as of 10th December 2017    1,350,000 Net Income earned (Retained Earnings)       400,000 Stock Dividend to be issued 15% No of shares issued as dividend          40,500 Par Value                    5 Market Price                    8 Value of shares at Par       202,500 Value of shares at Market Value       324,000 Journal Entry : Retained Earnings A/c Dr       324,000 To Common Stock    202,500 To Paid up Capital in Excess of Par Value    121,500

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