Sweet TreatsSweet Treats JuneJune 1212, 20172017, 1. Journalize the declaration
ID: 2596024 • Letter: S
Question
Sweet TreatsSweet Treats
JuneJune
1212,
20172017,
1.
Journalize the declaration and distribution of the stock dividend.
2.
Prepare the stockholders' equity section of the balance sheet after the stock dividend.
3.
Why is total stockholders' equity unchanged by the stock dividend?
4.
Sweet TreatsSweet Treats
$ 620 comma 000$620,000
JuneJune1313,
20172017.
Sweet TreatsSweet Treats
55%
Journal Entry
Date
Accounts
Debit
Credit
June
12
Requirement 2. Prepare the stockholders' equity section of the balance sheet after the stock dividend. (Enter the accounts in the proper order for the stockholders' equity section of the balance sheet. Use parentheses or a minus sign for numbers to be subtracted.)
Balance Sheet (Partial)
Stockholders' Equity:
$
par,
shares
shares
Total stockholders' equity
Requirement 3. Why is total stockholders' equity unchanged by the stock dividend?
a promissory note
cash
no assets
agreed to pay later.
issued dividend checks totaling $375,000.
transferred $375,000 from Retained Earnings to Common Stock and Paid-in Capital in Excess of Par.
STST
$ 620 comma 000$620,000
JuneJune
1313,
20172017.
STST
STST's
are unlimited.
cannot exceed the balance in the Cash account, $620,000
cannot exceed the balance in the Common Stock account, $393,750
cannot exceed the balance in the Retained Earnings account, $6,736,000
The stockholders' equity forSweet TreatsSweet Treats
Corporation onJuneJune
1212,
20172017,
followsStockholders' Equity Common stock, $0.75 par, 3,000,000 shares authorized, 500,000 shares issued $375,000 Paid-in capital in excess of par—common 1,076,267 Retained earnings 7,111,000 Accumulated other comprehensive income (loss) -210,000 Total stockholders' equity $8,352,267
Explanation / Answer
1 Date Account titles Debit Credit June. 12 Retained earnings 375000 Stock dividend distributable 206250 (500000*55%*0.75) Paid-in capital in excess of par-common 168750 (Declaration of stock dividend) Stock dividend distributable 206250 Common stock 206250 (Distribution of stock dividend) 2 Stockholder's equity Common stock,$0.75 par,3000000 shares Authorized,775000 shares issued 581250 Paid-in capital in excess of par-common (1076267+168750) 1245017 Retained earnings (7111000-375000) 6736000 Accumulated other comprehensive income (loss) -210000 Total stockholders' equity 8352267 3 The stock dividend did not change total stockholders' equity because the company merely transferred $375000 from retained earnings to common stock and Paid-in Capital in Excess of Par 4 maximum cash dividends cannot exceed the balance in the Retained Earnings account,6736000
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