Bower Corporation reported the following information: common stock, $1 par; 50,0

Question

Bower Corporation reported the following information: common stock, $1 par; 50,000 shares authorized; 35,000 shares issued and outstanding. Required: 1. What is the appropriate journal entry to record a 10 percent stock dividend if the market price of the common stock is $30 per share when the dividend is declared? 2. What is the appropriate journal entry to record a 30 percent stock dividend if the market price of the common stock is $30 per share when the dividend is declared? 3. How do these transactions affect Bower’s total stockholders’ equity?

Explanation / Answer

There is no effect on stockholders equity only there is change in balance of common stock and retained earning .

No. Account title Debit credit 1 Retained earning     [3500*30] 105000 common stock         [3500*1] 3500 Paid in capital in excess of par 101500 [Stock dividend declared 35000 *10%= 3500] 2 Retained earning   [3500*1] 3500 Stock dividend distributable 3500

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