The Shareholders\' Equity category of Diddlysquat Company\'s balance sheet as of

Question

The Shareholders' Equity category of Diddlysquat Company's balance sheet as of January 1, 2015, appeared as follows: Declared a 15% stock dividend to common shareholders on January 15. At the time of the dividend, the common shares were selling for S30 per share. The stock dividend was to be issued to shareholders on February 14, 2015. Distributed the stock dividend to the shareholders on February 14,2015. Record the 20 IS transactions in journal form. Develop the Shareholders' Equity section of Diddlysquat Company's balance sheet as of February 14 2015, after the stock dividend was issued. What effect did these transactions have on total shareholders' equity?

Explanation / Answer

Number of shares outstanding 40000 Stock dividend 15% Number of shares distributed as dividend 6000 Market value 30 stock dividend distributable ( 6000 * 30) 180000 1) 15-Jan Retained earnings Dr 180000       Common stock dividend distributable Cr 180000 ( To record stock dividend of 15% declared) 15-Feb Common stock dividend distributable Dr 180000                Common Stock Cr 180000 ( To record issuance of stock dividend declared) 2) Common Stock,     40000 no par shares issued and outstanding 500000 Add : 6000 stock dividend shares issued 180000 680000 Retained earnings 400000 Less : transferred towards stock dividend 180000 220000 Total shareholders equity 900000

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