Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 13: Q30E_ 2 (page 715)

Journalizing cash and stock dividends

Self-Defense Schools, Inc. is authorized to issue 200,000 shares of \(2 par common stock. The company issued 73,000 shares at \)5 per share. When the market price of common stock was \(7 per share, Self-Defense Schools declared and distributed a 14% stock dividend. Later, Self-Defense Schools declared and paid a \)0.70 per share cash dividend.

Requirements

2. Journalize the declaration and the payment of the cash dividend.

Short Answer

Expert verified

Retained Earnings is debited with $439,460; Common stock dividend $43,946 and paid in capital in excess of par $395,514 is credited

Common stock dividend is debited, and Cash is credited with $43,946

Step by step solution

01

Basic Introduction-

Cash dividend 62,780 shares (73,000-14%)

Retained Earnings(62,780 shares * $7)

Common stock dividend (62,780 shares * $0.70)

Paid in capital in excess of par[62,780 shares ($7- $0.7)]

02

Journals-

Date

Transaction

Debit

Credit

Retained Earnings

$439,460

Common stock dividend

$43,946

Paid in capital in excess of par

$395,514

To record stock dividend declared

Common stock dividend

$43,946

Cash

$43,946

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!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What is the price/earnings ratio, and how is it calculated?

Analyzing the effect of prior-period adjustments

Taylor Corporation discovered in 2019 that it had incorrectly recorded in 2018 a cash payment of \(70,000 for utilities expense. The correct amount of the utilities expense was \)35,000.

Requirements

2. How should this error be reported in the 2019 financial statements?

Identifying advantages and disadvantages of a corporation

Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage.

b. Entity has continuous life.

Computing dividends on preferred and common stock and journalizing

Northern Communications has the following stockholders’ equity on December 31,

2018:

Preferred Stock—5%, \(11 Par Value; 150,000 shares authorized, 20,000 shares issued and outstanding

Paid-In Capital:

\) 220,000

760,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 680,0006

Total Paid-In Capital 1,660,000

Retained Earnings 200,000

Total Stockholders’ Equity \( 1,860,000

Common Stock—\)2 Par Value; 575,000 shares

authorized, 380,000 shares issued and outstanding

Requirements

1. Assuming the preferred stock is cumulative, compute the amount of dividends to preferred stockholders and to common stockholders for 2018 and 2019 if total dividends are \(9,000 in 2018 and \)45,000 in 2019. Assume no changes in preferred stock and common stock in 2019.

Question: Organizing a corporation and issuing stock

Jimmy and Randy are opening a comic store. There are no competing comic stores in the area. They must decide how to organize the business. They anticipate profits of $550,000 the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.

Requirements

1. What is the main advantage they gain by selecting a corporate form of business now?
See all solutions

Recommended explanations on Business Studies Textbooks

Organizational Communication

Read Explanation

Influences On Business

Read Explanation

Nature of Business

Read Explanation

Human Resources

Read Explanation

Change Management

Read Explanation

Operational Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free