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QS 11-7 Accounting for small stock dividend LO P2 The stockholders’ equity section of Jun Company’s...

QS 11-7 Accounting for small stock dividend LO P2

The stockholders’ equity section of Jun Company’s balance sheet as of April 1 follows. On April 2, Jun declares and distributes a 15% stock dividend. The stock’s per share market value on April 2 is $15 (prior to the dividend).

Common stock—$5 par value, 435,000 shares
authorized, 230,000 shares issued and outstanding $ 1,150,000
Paid-in capital in excess of par value, common stock 550,000
Retained earnings 863,000
Total stockholders' equity $ 2,563,000


Prepare the stockholders’ equity section immediately after the stock dividend.

JUN COMPANY
Stockholders' Equity
April 2 (after stock dividend)
Common stock
Paid-in capital in excess of par value, common stock
Total paid-in capital 0
Retained earnings
Total stockholders' equity $0
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Answer #2
Issues and outstanding shares 230000
Mulitply: % of stock dividend 15%
Number of shares of stock dividend 34500
Multiply: Market price per share 15
Stock dividend amount 517500
Credit to Common Stock (34500*5) 172500
Credit to Paid in capital (34500*10) 345000
Stockholder's equity:
Common stock , 264500 shares @5 each 1322500
Paid in capital in excess of par 895000
(550000+345000)
Total paid in capital 2217500
Retained earnings (863000-517500) 345500
Total Stockholder's equity 2563000
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