Question

Company Z has 2.5 million shares of common stock authorized with a par value of $1 and a market price of $60. There are 1.25 million outstanding shares and 0.3125 million shares held in treasury stock. Required: a. Prepare the journal entry if the company declares and distributes a 10% stock dividend. b. Show the effect of the 10% stock dividend on assets, liabilities, and stockholders' equity. c. Prepare the journal entry if the company declares and distributes a 100% stock dividend. d. Show the effect of the 100% stock dividend on assets, liabilities, and stockholders' equity. Complete this question by entering your answers in the table below. Required A Required B Required C Required D Prepare the journal entry if the company declares and distributes a 10% stock dividend. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars and not in millions.) View transaction list Journal entry worksheet Record the declaration and distribution of the 10% stock dividend. Note: Enter debits before credits. Transaction General Journal Debit Credit

Answer 1

ANSWER

Solution a:

Journal Entries - Company Z
Event	Particulars	Debit	Credit
a	Stock dividend Dr (1,250,000*10%*$60)	$7,500,000.00
	To Common Stock		$125,000.00
	To Paid in capital in excess of par - Common Stock		$7,375,000.00
	(To record declaration and distribution of stock dividend)

Solution b:

Assets		=	Liabilities		+	Stockholder's Equity
						Retained Earnings	-$7,500,000.00
						Common stock	$125,000.00
						Paid in capital in excess of par - common stock	$7,375,000.00

Solution c:

Journal Entries - Company Z
Event	Particulars	Debit	Credit
c	Stock dividend Dr (1250000*100%*$1)	$1,250,000.00
	To Common Stock		$1,250,000.00
	(To record declaration and distribution of stock dividend)

Solution d:

Assets		=	Liabilities		+	Stockholder's Equity
						Retained Earnings	-$1,250,000.00
						Common stock	$1,250,000.00

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