Question

The stockholders’ equity of Concord Inc. at December 31, 2013, appears below: Common stock, $15 par...

The stockholders’ equity of Concord Inc. at December 31, 2013, appears below:

Common stock, $15 par value, 200,000 shares authorized,135,000 shares issued and outstanding

2,025,000

Paid-in capital in excess of par value

1,750,000

Retained earnings

2,375,000

During 2014, the following transactions occurred:

May 10: Declared and issued a 10% common stock dividend when market value was $40 per share

December 10: Declared a cash dividend of $2.50 per share to be paid in January 2015.

December 31: Recognized net income of $ 1,087,000.

a. Prepare the journal entry to record the stock dividend.

      

b. How much was the cash dividend paid?

Ans: ___________________

Business   Accounting   
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Homework Answers

Answer #1

a.

In the Books of M/s Concord Inc
Journal
Date Particulars Dr($) Cr($)
10-May Retained Earnings 800000
To Stock Dividends Distributable 300000
To Addition Paid-In Capital 500000
(Being declaration of Stock Dividends)
10-May Stock Dividends Distributable 300000
To Common Stock 300000
(Being isuue of common stock on declaration of stock dividend)

Retained earnings to be debited by=10%*200000*40(market value)=800000

Stock dividend distributable=10%*200000*15(book value)=300000

Addition paid-in capital=10%*200000*40(Market value)-stock dividend distributable=500000

b.

Amount of cash dividends=2.50*no. of outstanding shares as on date=2.50*(200000+20000)=$5,50,000

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