Question

1. Prepare entries to record both the dividend declaration and its distribution.

Required information

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

Common stock—$10 par value, 150,000 shares authorized, 71,000 shares issued and outstanding	$	710,000
Paid-in capital in excess of par value, common stock		525,000
Retained earnings		675,000
Total stockholders’ equity	$	1,910,000

On February 5, the directors declare a 16% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $41 per share on February 5 before the stock dividend. The stock’s market value is $35 per share on February 28.

Answer 1

Date	Title	Debit	Credit
Feb-05	Retained earnings (71,000*$41*16%)	$ 465,760
	Stock dividend distributable (71,000*$10*16%)		$ 113,600
	Paid-in capital in excess of par—common stock		$ 352,160
	(To record declaration of 16% stock dividend)
Feb-28	Stock dividend distributable	$ 113,600
	Common stock		$ 113,600
	(To record distribution of stock dividend)

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