Selected transactions completeted by Company during the current fiscal year are

Question

Selected transactions completeted by Company during the current fiscal year are as follows:

1. Split the common stock 2 for 1 and reduced the par from $40 to $20 per share. After the split there were 250,000 common shares outstanding.

2. Declared semiannual dividends of $1.50 on 18,000 shares of preferred stock and $0.08 on the common stock to stockholders of the record on May 10, payable on June 9.

3. Paid the Cash Dividends

4. Declared semiannual dividends of $1.50 on the preferred stock and the $0.04 on the common stock ( before the stock dividend). In addition, a 2% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $36.

5. Paid the cash Dividends and issued the certificates for the common stock dividend.

JOURNALIZE THE TRANSACTIONS

Explanation / Answer

Hi,

Please find the entries as follows:

1) No Journal Entry is Required.

2) Retained Earnings Dr. (18000*1.5 + 250000*.08) 47000

Dividend Payable Cr. 47000

3) Dividend Payable Dr. 47000

To Cash Cr. 47000

4) Retained Earnings Dr. (18000*1.5 + 250000*.04) 37000

Dividend Payable Cr. 37000

Stock Dividends Dr. (250000*2%*36) 180000

Stock Dividend Distributable Cr. (250000*2%*20) 100000

Paid in Capital - Excess of Par Cr. 80000

5) Dividend Payable Dr. 37000

Cash Cr. 37000

Stock Dividends Distributable Dr. 100000

Common Stock Cr. 100000

Thanks.

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