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Company Z as 2.15 million shares of common stock authorized with a par value of $1...

Company Z as 2.15 million shares of common stock authorized with a par value of $1 and a market price of $53. There are 1.075 million outstanding shares and 0.26875 million shares held in treasury stock.

a. Prepare the journal entry if the company declares and distributes a 10% stock dividend.

b. Show the effect of the 10% stock dividend on assets, liabilities, and stockholders' equity.

c. Prepare the journal entry if the company declares and distributes a 100% stock dividend.

d. Show the effect of the 100% stock dividend on assets, liabilities, and stockholders' equity.

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Answer #1

a) Journal entry

Event General journal Debit Credit
Declaration Stock dividend (1075000*10%*53) 5697500
Common Stock dividend distributable 107500
Paid in capital in excess of par value-Common Stock 5590000
Distributed Common Stock dividend distributable 107500
Common Stock 107500

b) Effect

Assets = Liabilities + Stockholder's equity
Common Stock PIC in excess Retained earnings
Effect 107500 5590000 -5697500

c) Journal entry

Event General journal Debit Credit
Declaration Stock dividend (1075000*100%*1) 1075000
Common Stock dividend distributable 1075000
Distributed Common Stock dividend distributable 1075000
Common Stock 1075000

d) Effect

Assets = Liabilities + Stockholder's equity
Common Stock PIC in excess Retained earnings
Effect 1075000 -1075000
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