PROBLEM 11 8 points) Hi-tech Manufacturing Company has 1,000,000 shares of $1 pa

Question

PROBLEM 11 8 points) Hi-tech Manufacturing Company has 1,000,000 shares of $1 par value common stock outstanding on January 1. The following equity transactions occurred during the current year. Prepare journal entries to record these transactions. a) June 1 Declared a cash dividend of $0.60 per share b) July 1 Paid the $0.60 cash dividend to stockholders c) August 1 Declared a 5 percent stock dividend. Market price of the stock was $19 per share d) September 10 Issued shares resulting from the 5 percent stock dividend declared on August 1

Explanation / Answer

Debit($)   Credit($)

a) June 1 Retained Earnings A/c Dr. (0.6*1,000,000 shares) 600,000

To Dividend Payable A/c 600,000

(Being dividend declared @0.6 per share)

b) July 1 Dividend Payable A/c Dr. 600,000

To Cash A/c 600,000

(Being dividend paid declared on June 1)

c) August 1 Retained Earning A/c Dr. [(1,000,000*5%) shares*19] 950,000

To Common stock dividend distributable A/c (50,000 shares*1) 50,000   

To Paid in capital excess of par A/c (50,000 shares*18) 900,000

(Being Stock dividend declared at 5%)

d) September 10 Common stock dividend distributable A/c Dr. 50,000

To Common Stock A/c 50,000

(Being stock dividend of 50,000 shares distributed to shareholders which were declared on August 1)

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