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Chapter 15: Question 13BE (page 811)

Green Day Corporation has outstanding 400,000 shares of \(10 par value common stock. The corporation declares a 5% stock dividend when the fair value of the stock is \)65 per share. Prepare the journal entries for Green Day Corporation for both the date of declaration and the date of distribution.

Short Answer

Expert verified

The total dividend distributed by Green Day Corporation is $200,000.

Step by step solution

01

Meaning of Common Stock

The security that symbolizes possession in a company is known as common stock. Unusual shareholders do not accompany the board of administrators and do not participate in enterprise decision-making.

02

Preparing Journal Entries   

Date

Particular

Debit ($)

Credit ($)

Declaration Date

Retained Earnings A/c

1,300,000

Common Stock Dividend Distributable A/c

200,000

Paid-in Capital in excess of par common stock A/c

1,100,000

To record the payment of dividend

DistributionDate

Common Stock Dividend Distributable A/c

200,000

Common Stock A/c

200,000

To record the payment of dividend

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Most popular questions from this chapter

Nottebart Corporation has outstanding 10,000 shares of \(100 par value, 6% preferred stock and 60,000 shares of \)10 par value common stock. The preferred stock was issued in January 2017, and no dividends were declared in 2017 or 2018. In 2019, Nottebart declares a cash dividend of $300,000. How will the dividend be shared by common and preferred stockholders if the preferred is (a) noncumulative and (b) cumulative?

Wilco Corporation has the following account balances on December 31, 2017.

Share capital—ordinary, \(5 par value \) 510,000

Treasury shares 90,000

Retained earnings 2,340,000

Share premium—ordinary 1,320,000

Instructions

Prepare Wilco’s December 31, 2017, equity section.

Washington Company has the following stockholders’ equity accounts at December 31, 2017.

Common Stock (\(100 par value, authorized 8,000 shares) \)480,000

Retained Earnings 294,000

Instructions

a. Prepare entries in journal form to record the following transactions, which took place during 2018.

1. 280 shares of outstanding stock were purchased at \(97 per share. (These are to be accounted for using the cost method.)

2. A \)20 per share cash dividend was declared.

3. The dividend declared in (2) above was paid.

4. The treasury shares purchased in (1) above were resold at \(102 per share.

5. 500 shares of outstanding stock were purchased at \)105 per share.

6. 350 of the shares purchased in (5) above were resold at \(96 per share.

b.Prepare the stockholders’ equity section of Washington Company’s balance sheet after giving effect to these transactions, assuming that the net income for 2018 was \)94,000. State law requires restriction of retained earnings for the amount of treasury stock.

(Dividend Entries) The following data were taken from the balancesheet accounts of Masefield Corporation on December 31, 2016.

Current assets \(540,000

Debt investments (trading) 624,000

Common stock (par value \)10) 500,000

Paid-in capital in excess of par 150,000

Retained earnings 840,000

Instructions

Prepare the required journal entries for the following unrelated items.

  1. A 5% stock dividend is declared and distributed at a time when the market price per share is \(39.
  2. The par value of the common stock is reduced to \)2 with a 5-for-1 stock split.
  3. A dividend is declared January 5, 2017, and paid January 25, 2017, in bonds held as an investment. The bonds have a book value of \(100,000 and a fair value of \)135,000.

Under IFRS, the amount of capital received in excess of par value would be credited to:

(a) Retained Earnings.

(b) Contributed Capital.

(c) Share Premium.

(d) Par value is not used under IFRS
See all solutions

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