Chapter 13: Q29E_1 (page 715)

Journalizing a stock dividend and reporting stockholders’ equity
The stockholders’ equity of Lakeside Occupational Therapy, Inc. on December 31, 2017, follows:
Common Stock—$1 Par Value; 1,200 shares
authorized, 400 shares issued and outstanding
Paid-In Capital:
120,000
400
2,000
Retained Earnings
Total Stockholders’ Equity $ 122,000
Stockholders’ Equity
Paid-In Capital in Excess of Par—Common 1,600
Total Paid-In Capital
$
On April 30, 2018, the market price of Lakeside’s common stock was $16 per share and the company declared a 13% stock dividend. The stock was distributed on May 15.
Requirements
1. Journalize the declaration and distribution of the stock dividend.

Short Answer

Expert verified

Stock dividend declared $832 out of which the Common stock dividend is $52 and paid-in excess of par is $780.

Step by step solution

Basic Introduction

$\begin{array}{rcl} RetainedEarnings & = & NumberofShares \times StockDividend \times MarketPricePerShare \\ = & 400 \times 13 % \times $ 16 \\ = & $ 832 \end{array}$

$\begin{array}{rcl} CommonStock & = & NumberofShares \times StockDividend \times ParValuePerShare \\ = & 400 \times 13 % \times $ 1 \\ = & $ 52 \end{array}$

Journal entry of declaration and distribution of stock dividend

Date	Transaction	Debit	Credit
Apr 30, 2018	Retained Earnings	$832
	Common stock dividend		$52
	Paid-in capital in excess of par		$780
	To record dividend declared
May 15,2018	Common Stock dividend distribute	$52
	Common stock		$52
	To record dividend paid

Unlock Step-by-Step Solutions & Ace Your Exams!

Full Textbook Solutions
Get detailed explanations and key concepts
Unlimited Al creation
Al flashcards, explanations, exams and more...
Ads-free access
To over 500 millions flashcards
Money-back guarantee
We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

Recommended explanations on Business Studies Textbooks

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Short Answer

Step by step solution

Basic Introduction

Journal entry of declaration and distribution of stock dividend

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Managers

Intermediate Accounting

Business Case Studies

Organizational Behavior

Strategic Direction

Strategic Analysis

Study anywhere. Anytime. Across all devices.