Procter & Gamble is a well-known consumer products company that owns a variety o

Question

Procter & Gamble is a well-known consumer products company that owns a variety of popular brands. A recent news article contained the following information:

CINCINNATI, March 9 /PRNewswire-FirstCall/—The Procter & Gamble Company (NYSE: PG) today said that earnings per share for the January through March quarter as well as the fiscal year is expected to exceed current consensus estimates by $0.03 to $0.06. The increased earnings are being driven by continued strong organic volume growth.

Stock Dividend The company also announced today that its board of directors approved a 14% stock dividend to shareholders of record on May 21. This move does not change the proportionate interest a shareholder maintains in the company. The additional shares will be distributed on June 18. In a separate action, the board declared an increase in the annual rate of its common stock dividend from $1.78 to $2.07 per share.

Required: 1. Prepare any journal entries that P&G should make as the result of information in the preceding report. Assume that the company has 2,510 million shares outstanding, the par value is $3.00 per share, and the market value is $62 per share.

Explanation / Answer

Journal Entry at the time of declaration (Amount in million)

Retained Earning (351 x 62) $ 21,762

Common Stock Dividend Distributable (351 x 3) $ 1,053

Paid in capital in excess of par (351 x 59) $ 20,709

(14% stock dividend = 2510 x 14%)

Journal Entry on June 18, when shares are distributed to stockholders

Common stock dividend distributable $ 1,053

Common Stock $ 1,053

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