Required informationExercise 11-10 (Static) Small stock dividend LO P2Skip to question[The following information applies to the questions displayed below.]The stockholders’ equity section of TVX Company on February 4 follows.Common stock—$10 par value, 150,000 shares authorized, 60,000 shares issued and outstanding $ 600,000Paid-in capital in excess of par value, common stock 425,000Retained earnings 550,000Total stockholders’ equity $ 1,575,000On February 5, the directors declare a 20% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $40 per share on February 5 before the stock dividend.Exercise 11-10 (Static) Part 11. Prepare entries to record both the dividend declaration and its distribution.
Question
Required informationExercise 11-10 (Static) Small stock dividend LO P2Skip to question[The following information applies to the questions displayed below.]The stockholders’ equity section of TVX Company on February 4 follows.Common stock— 600,000Paid-in capital in excess of par value, common stock 425,000Retained earnings 550,000Total stockholders’ equity 40 per share on February 5 before the stock dividend.Exercise 11-10 (Static) Part 11. Prepare entries to record both the dividend declaration and its distribution.
Solution
The entries to record both the dividend declaration and its distribution would be as follows:
- Declaration of the Dividend on February 5:
The declaration of a 20% stock dividend means that each shareholder will receive an additional share for every five shares they own. This means that 12,000 additional shares will be issued (60,000 shares * 20%).
The entry to record the declaration of the dividend would be:
Debit: Retained Earnings 40 market value)
Credit: Common Stock Dividend Distributable 10 par value)
Credit: Paid-in Capital in Excess of Par Value, Common Stock 40 market value - $10 par value))
- Distribution of the Dividend on February 28:
The entry to record the distribution of the dividend would be:
Debit: Common Stock Dividend Distributable $120,000
Credit: Common Stock $120,000
This entry moves the dividend from a dividend payable account to the common stock account, reflecting the issuance of the new shares.
Similar Questions
Stockholders’ equity of Ernst Company consists of 85,000 shares of $5 par value, 11% cumulative preferred stock and 305,000 shares of $1 par value common stock. Both classes of stock have been outstanding since the company’s inception. Ernst did not declare any dividends in the prior year, but it now declares and pays a $150,000 cash dividend at the current year-end.Determine the amount distributed to each class of stockholders for this two-year-old company.
A company's board of directors votes to declare a cash dividend of $.75 per share of common stock. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is:Group of answer choices$10,250.$14,625.$7,125.$7,500.$11,250.
Murphy's, Incorporated, has 32,650 shares of stock outstanding with a par value of $1 per share. The market value is $14 per share. The balance sheet shows $89,250 in the capital in excess of par account, $32,650 in the common stock account, and $161,950 in the retained earnings account. The firm just announced a stock dividend of 12 percent. What will the market price per share be after the dividend?Multiple Choice$13.50$13.39$14.39$14.00$12.50 PrevQuestion 4 of 10 Total4 of 10Visit question mapNe
The board of directors of a stock corporation may declare dividends out of the unrestricted retained earnings which shall be payable in cash, property, or in stock to all stockholders on the basis of outstanding stock held by them.Group of answer choicesTrueFalse
A majority of the board of directors is sufficient to declare stock dividends.Group of answer choicesTrueFalse
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.