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Chapter 13: Q30E_1 (page 715)

Journalizing cash and stock dividends

Self-Defense Schools, Inc. is authorized to issue 200,000 shares of \(2 par common stock. The company issued 73,000 shares at \)5 per share. When the market price of common stock was \(7 per share, Self-Defense Schools declared and distributed a 14% stock dividend. Later, Self-Defense Schools declared and paid a \)0.70 per share cash dividend.

Requirements

1. Journalize the declaration and the distribution of the stock dividend.

Short Answer

Expert verified

Retained Earnings is debited $71,540; Common stock dividend $51,100 and paid in capital in excess of par $20,440 is credited

Common stock dividend is debited, and Common stock is credited with $51,100

Step by step solution

01

Basic Introduction-

Stock dividend 10,220 shares (73,000* 14%)

Retained Earnings(10,220 shares * $7)

Common stock dividend (10,220 shares * $5)

Paid in capital in excess of par[10,220 shares ($7- $5)]

02

Journals-

Date

Transaction

Debit

Credit

Retained Earnings

$71,540

Common stock dividend

$51,100

Paid in capital in excess of par

$20,440

To record stock dividend declared

Common stock dividend

$51,100

Common stock

$51,100

To record dividend paid

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Most popular questions from this chapter

What is treasury stock? What type of account is Treasury Stock, and what is the account鈥檚 normal balance?

What does the statement of stockholders鈥� equity report? How does the statement of stockholders鈥� equity differ from the statement of retained earnings?

Computing price/earnings ratio Refer to the HEB data in Short Exercise S13-17. Assume the market price of HEB鈥檚 common stock is $19.50 per share. Compute HEB鈥檚 price/earnings ratio.

Question: Copperhead Trust has the following classes of stock:

Preferred Stock鈥�6%, \(12 par value; 8,500 shares authorized, 7,000 shares issued and outstanding

Common Stock鈥擻)0.10 par value; 2,100,000 shares authorized, 1,400,000 shares issued and outstanding

Requirements

2. Assume the preferred stock is cumulative and Copperhead passed the preferred dividend in 2016 and 2017. In 2018, the company declares cash dividends of $46,000. How much of the dividend goes to preferred stockholders? How much goes to common stockholders?

Computing earnings per share, price/earnings ratio, and rate of return on common stockholders鈥� equity

Bianchi Company reported these figures for 2018 and 2017:

2018 2017

Income Statement鈥攑artial:

Net Income \( 34,380 \) 18,000

Dec. 31, 2018 Dec. 31, 2017

Balance Sheet鈥攑artial:

Total Assets \( 285,000 \) 280,000

Paid-In Capital:

Preferred Stock鈥�11%, \(9 Par Value; 60,000 shares

authorized, 12,000 shares issued and outstanding

\) 108,000 \( 108,000

Common Stock鈥擻)2 Par Value; 60,000 shares

authorized, 50,000 shares issued and outstanding

100,000 100,000

Paid-In Capital in Excess of Par鈥擟ommon 14,000 14,000

Retained Earnings 60,500 38,000

Total Stockholders鈥� Equity \( 282,500 \) 260,000

Requirements

2. Compute Bianchi Company鈥檚 price/earnings ratio for 2018. Assume the company鈥檚 market price per share of common stock is $9. Round to two decimals.
See all solutions

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