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Chapter 15: Question 14BE (page 811)

Use the information from BE15-13, but assume Green Day Corporation declared a 100% stock dividend rather than a 5% stock dividend. Prepare the journal entries for both the date of declaration and the date of distribution.

Short Answer

Expert verified

The dividend distributed by Green Day Corporation is $4,000,000.

Step by step solution

01

Meaning of Dividend Declaration:

The term dividend declaration refers to the process of proposing the news to share the part of profit among the outstanding shareholders. A company records it as aliability because it owes the business to pay the declared amount of dividend.

02

Preparing Journal Entries  

Declaration date

Date

Particular

Debit ($)

Credit $)

Retained Earnings A/c

4,000,000

Common stock Dividend

Distributable A/c

4,000,000

To record the payment of dividend

Distribution Date

Common Stock Dividend Distributable A/c.

4,000,000

Common Stock A/c.

4,000,000

To record the payment of dividend

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Most popular questions from this chapter

What features or rights may alter the character of preferred stock?

(Preferred Dividends) Matt Schmidt Company鈥檚 ledger shows the following balances on December 31, 2017.

7% Preferred stock鈥擻(10 par value, outstanding 20,000 shares \) 200,000

Common stock鈥擻(100 par value, outstanding 30,000 shares 3,000,000

Retained earnings 630,000

Instructions

Assuming that the directors decide to declare total dividends in the amount of \)366,000, determine how much each class of stock should receive under each of the conditions stated below. One year鈥檚 dividends are in arrears on the preferred stock.

  1. The preferred stock is cumulative and fully participating.
  2. The preferred stock is noncumulative and nonparticipating.
  3. The preferred stock is noncumulative and is participating in distributions in excess of a 10% dividend rate on the common stock.

Faith Evans Corporation is a regional company which is an SEC registrant. The corporation鈥檚 securities are thinly traded on NASDAQ. Faith Evans Corp. has issued 10,000 units. Each unit consists of a \(500 par, 12% subordinated debenture and 10 shares of \)5 par common stock. The units were sold to outside investors for cash at \(880 per unit. Prior to this sale, the 2-week ask price of common stock was \)40 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value.

Instructions

  1. Prepare the journal entry to record Evans鈥� transaction, under the following conditions.
  2. Employing the incremental method.
  3. Employing the proportional method, assuming the recent price quote on the common stock reflects fair value.
  4. Briefly explain which method is, in your opinion, the better method.

Indicate how each of the following accounts should be classified in the stockholders鈥� equity section.

  1. Common Stock.
  2. Retained Earnings.
  3. Paid-in Capital in Excess of Par鈥擟ommon Stock.
  4. Treasury Stock.
  5. Paid-in Capital from Treasury Stock.
  6. Paid-in Capital in Excess of Stated Value鈥擟ommon Stock.
  7. Preferred Stock.

Seles Corporation鈥檚 charter authorized issuance of 100,000 shares of \(10 par value common stock and 50,000 shares of \)50 preferred stock. The following transactions involving the issuance of shares of stock were completed. Each transaction is independent of the others.

  1. Issued a \(10,000, 9% bond payable at par and gave as a bonus one share of preferred stock, which at that time was selling for \)106 a share.
  2. Issued 500 shares of common stock for equipment. The equipment had been appraised at \(7,100; the seller鈥檚 book value was \)6,200. The most recent market price of the common stock is \(16 a share.
  3. Issued 375 shares of common and 100 shares of preferred for a lump sum amounting to \)10,800. The common had been selling at \(14 and the preferred at \)65.
  4. Issued 200 shares of common and 50 shares of preferred for equipment. The common had a fair value of \(16 per share; the equipment has a fair value of \)6,500.

Instructions

Record the transactions listed above in journal entry form.
See all solutions

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