On February 15, Mite Corporation\'s board of directors declared a 2 percent stoc

Question

On February 15, Mite Corporation's board of directors declared a 2 percent stock dividend applicable to the outstanding shares of its $10 par value common stock, of which 400,000 shares are authorized, 260,000 are issued, and 40,000 are held in the treasury. The stock dividend was distributed on March 15 to stockholders of record on March 1. On February 15, the market value of the common stock was $15 per share. On March 30, the board of directors declared a $0.50 per share cash dividend. No other stock transactions have occurred.

Prepare journal entries to record, as necessary, the transactions of February 15, March 1, March 15, and March 30.

Please explain HOW to find the journal entries for March 30

Explanation / Answer

It is given that 2% stock dividend was declared on February 15 and distributed on March 1.

Outstanding shares before March 1 are 220,000(260,000issued - 40,000treasury)

And then 2% of stock dividend is distributed.

Now the number of outstanding shares become 224,400 ( 220,000 + 2%)

Amd on March 30, $0.50 per share cash dividend is declared. (for 224,200 shares - remember the previous point)

Therefore the entry will be

Debit - Retained Earnings $112,200

Credit - Dividend Payable $112,200

(224,400 shares x 0.50 per share)

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