Journalizing a stock dividend and reporting stock holders’ equity The stockholde

Question

Journalizing a stock dividend and reporting stock holders’ equity The stockholders’ equity of Pondside Occupational Therapy, Inc. On December 31, 2013 follows: Stockholders’ Equity Paid in capital: Common stock-$1 par value; 1,250 shares authorized, 530 shares issued and outstanding $530 Paid-in capital in excess par---Common 2,120 Total paid-in capital 2,650 Retained earnings 121,000 Total stockholders’ equity $123,650 On April 30, 2014, the market price of Pondside’s common stock was $11 per share and the company declared a 10% stock dividend. The stock was distributed on May 15. Requirements 1. Journalize the declaration and distribution of the stock dividend 2. Prepare the stockholders’ equity section of the balance sheet after the stock dividend. Assume retained earnings are $121,000 on April 30, 2014, before the stock dividend

Explanation / Answer

The paid in Capital is $2650 but No. of shares issued are 530 shares having par value of $1 ..

so dividend amount = 530 shares*$1 par value *10% = $53

Journal entry

Retained earning A/c Dr. $53
To Dividend Payable A/c $53
( being dividend on stock declared

Dividend payable A/c Dr. $53
To Dividend to equity share holder A/c $53
(being dividend posted to account of equitystock holders)

Dividend to equitytock holder A/c Dr. $53
To Bank A/c $53
(being dividend paid)

Stock holders` Equity section
Authorized capital shares 1250 par value $1
issued and outstanding $530 (530 shares par value $1)
paid in capital Excess par $2120
Total paid in capital $2650
Retained earnings $120947
Total Stock holders` Equity $123597

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