Question

The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows....

The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows.

Common stock—$25 par value, 150,000 shares
authorized, 56,000 shares issued and outstanding		 $ 1,400,000
Paid-in capital in excess of par value, common stock 425,000
Retained earnings 546,000
Total stockholders’ equity $ 2,371,000


On February 5, the directors declare a 2% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $36 per share on February 5 before the stock dividend.

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Answer #1

Date

General Journal

Debit

Credit

Feb 05

Retained Earnings Account

$40320

   Common stock Dividend Payable

$28000

   Paid in Capital – Common stock

$12320

(Record of stock Dividend payable)

Feb 28

Common stock Dividend Payable

$28000

   Common Stock

$28000

(Record of distribution of Dividends)

Workings:

Number of share issued and outstanding = 56000

Stock Dividend = 56000 x 2% = 1120 shares

Common stock Dividend payable = 1120 shares x $25 = $28000

Paid in Capital – Common stock = 1120 shares x ($36 - $25) = $12320

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