6. 4 points) Equity transactions For each of the following independent transacti

Question

6. 4 points) 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 100,000 shares of preferred stock outstanding. (b) Declared and distributed a 10% stock dividend on 400,000 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 Accounts Debits Credits d.

Explanation / Answer

Journal entry accounting titles & explanations Debit Credit a) retained earnings 40000 cash (100,000*.4) 40,000 b) Retained earnings (40000*25) 1000000 common stock (40000*5) 200000 paid in capital in excess of par 800000 c) no entry d) Retained earnings (160000*5) 800000 common stock (160000*5) 800,000 (being a large stock dividend)

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