Question 4fot 4) value 600 points On December 31, the stocdholders\' equity sedt

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Question 4fot 4) value 600 points On December 31, the stocdholders' equity sedtion of the balance sheet of R&B; Corporation refilected the following Common stock (par $10; authorized 60.000 shares, outstanding 21,000 shares) 210.000 Additional paid-in capital Retained earnings 1,000 71,000 On February 1 of the following year a 10 peroent stock dividend was issued The maket value of the stock on February 1 was $22 per share Required Prepare the journal entry to reaord (a) the small 10 percent stod dividend and, alternatively, (b) the large 100 percent stock dividend (if no entry is required for a transaction/event, seleot "No Journal Entry Required" in the first account field View transaction list Journal entry worksheet Record the issue of10 percent stock dividend on the 21,000 shares of stock outstanding with a market value of $22 per share. Note: Enter debits before credits. Debit Credit General Journal ransaction tMesilla co that we can improve your experience.

Explanation / Answer

R&B Corporation

Journal Entries to record a. the small 10% stock dividend and alternatively, b. the large 100% stock dividend:

Account Titles and Explanation

Debit

Credit

Retained Earnings

(21,000 x 10% x $22)

$46,200

Common Stock Dividend Distributable (21,000 x 10% x $10)

$21,000

Paid-in Capital in Excess of par – Common ($21,000 x $12)

$25,200

(To record declaration of stock dividend – 21,000 x 10% = 2,100 shares; Market value = $22 per share, dividend distributable at $10 per share on 2,100 shares and Paid-in capital in excess of par = $22-$10)

Common Stock Dividend Distributable

$21,000

Common Stock

$21,000

(To record payment of stock dividend)

Account Titles and Explanation

Debit

Credit

Retained Earnings

(21,000 x 100% x $10)

$210,000

Common Stock Dividend Distributable (21,000 x 100% x$10)

$210,000

(To record declaration of stock dividend - 21,000 x 100% = 21,000 shares, at par value of $10 per share. dividend distributable at $10 per share on 21,000 shares)

Common Stock Dividend Distributable

$210,000

Common Stock

$210,000

(To record payment of stock dividend)

Note:

Large stock dividends are those that are more than 20 to 25% of the total value of outstanding shares. The present case of 100% stock dividend declared and issued is regarded as large stock dividend.

Issue of large stock dividends are assumed to bring down the value of each share and hence the market value is not considered. The stock dividend is valued at par value and hence no Paid-in Capital account exists for the given case.

Account Titles and Explanation

Debit

Credit

Retained Earnings

(21,000 x 10% x $22)

$46,200

Common Stock Dividend Distributable (21,000 x 10% x $10)

$21,000

Paid-in Capital in Excess of par – Common ($21,000 x $12)

$25,200

(To record declaration of stock dividend – 21,000 x 10% = 2,100 shares; Market value = $22 per share, dividend distributable at $10 per share on 2,100 shares and Paid-in capital in excess of par = $22-$10)

Common Stock Dividend Distributable

$21,000

Common Stock

$21,000

(To record payment of stock dividend)

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