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The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows.

The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows. Common stock—$20 par value, 150,000 shares authorized, 57,000 shares issued and outstanding $ 1,140,000 Paid-in capital in excess of par value, common stock 429,000 Retained earnings 555,000 Total stockholders’ equity $ 2,124,000 On February 5, the directors declare a 2% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $31 per share on February 5 before the stock dividend. 1. Prepare entries to record both the dividend declaration and its distribution.

Solutions

Expert Solution

Date Account Title Debit Credit
Feb 5 Retained Earnings 35340
Common Stock dividend distributable 22800
Paid in capital in excess of par value-Common Stock 12540
( to record declaration of stock dividend)
Feb 28 Common Stock dividend distributable 22800
Common Stock 22800
(to record ditribution of stock dividend)

Explanation:

Number of shares outstanding = 57000
Current market value of 1 common stock = $ 31
Stock dividend declared = 2%
Hence, number of shares to be issued = 57000 shares x 2% = 1140

Hence, amount to be debited to retained earnings

= Number of shares to be issued x Current market value of 1 common stock
= 1140 shares x $ 31
= $ 35340
Amount to be credited to common stock

= Number of shares to be issued x Par value per share
= 1140 shares x $ 20
= $ 22800


Amount to be credited to Additional Paid in capital, in excess of par - common stock

= Number of shares to be issued x (market value of 1 common stock - Par value per share)
= 1140 shares x ( $ 31 - $ 20)
= $ 12540

ekkarill92 answered 2 years ago
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