Question

Douglas McDonald Company’s balance sheet included the following shareholders’ equity accounts at December 31, 2020:

	($ in millions)
Paid-in capital:
Common stock, 1,700 million shares at $1 par	$	1,700
Paid-in capital—excess of par		17,400
Retained earnings		16,088
Total shareholders’ equity	$	35,188

On March 16, 2021, a 4% common stock dividend was declared and distributed. The market value of the common stock was $37 per share. Fractional share rights represented 3 million equivalent whole shares. Cash was paid in lieu of the fractional share rights.

Required:
1. Complete the below table to calculate the value of shares issued.
2. Prepare the appropriate entries for the declaration and distribution of the stock dividend.

Answer 1

Calculation table

Particulars
Number of outstanding shares	1700(millions)
Stock dividend percentage	4%
Number of share issued	68(millions)
Market price per share	$37
Value of stock dividend	$2516(68 millions X $37)
Amount paid in cash for fractional shares	0
Value of stock dividend	$2516 millions

​​​​​​Journal enties

Account and explanation	Debit in $ millions	Credit in $ millions
Stock dividend	2516
Common Stock dividend distributable		68
Paid in capital in excess of par value-Common Stock		2448
(To record stock dividend declared)
Common Stock dividend distributable	68
Common Stock		68
(To record common stock distributed)