Stock Dividends and Stock Splits The capital accounts for Alston Market on June

Question

Stock Dividends and Stock Splits The capital accounts for Alston Market on June 30,2015, are as follows: Exercise 13-41 Common stock, s6 par, 50,000 shares issued and outstanding. Paid-in capital in excess of par 300 600,000 1,840,000 Shares of the company's stock are selling at this time at $44. What entries would you make in each of the following casesi (a) A 10% stock dividend is declared and issued (b) A 50% stock dividend is declared and issued. (c) A 2-for-1 stock split is declared and issued

Explanation / Answer

(a) Stock dividend to be paid = 50000 shares * $44*10% = $220000

Entry to be made
Retained earnings $220000
   Common stock distributable (5000*$6) $30000
   Paid in capital in excess of par $190000

(b) Stock dividend to be paid = 50000 shares * $44*50% = $1100000

Entry to be made
Retained earnings $1100000
   Common stock distributable (25000*$6) $150000
   Paid in capital in excess of par $950000

c) Total stock dividend= 50000*2 = 100000 shares, par value will be divided = $6/2 = $3
There will not be any entry to pass for stock entry. However, a memo entry will be made.

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