Question

The stockholders’ equity accounts of Waterway Company have the following balances on December 31, 2020.

Common stock, $10 par, 281,000 shares issued and outstanding		$2,810,000
Paid-in capital in excess of par—common stock		1,220,000
Retained earnings		5,600,000

Shares of Waterway Company stock are currently selling on the Midwest Stock Exchange at $34.

Prepare the appropriate journal entries for each of the following cases. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

(a)		A stock dividend of 6% is (1) declared and (2) issued.
(b)		A stock dividend of 100% is (1) declared and (2) issued.
(c)		A 2-for-1 stock split is (1) declared and (2) issued.

Answer 1

Event	Accounts Titles and explanation	Debit (in $)	Credit (in $)
a - (1)	Retained Earnings ( 281,000 Shares x 6% x $ 34)	$ 573,240
	Common Stock Dividend Distributable                ( 281,000 Shares x 6% x $ 10)		$ 168,600
	Paid-in Capital in Excess of Par-Common Stock		$ 404,640
	( To record the common stock dividend declared)
a - (2)	Common Stock Dividend Distributable	$ 168,600
	Common Stock		$ 168,600
	( To record the common stock dividend issued)
b - (1)	Retained Earnings	$ 2,810,000
	Common Stock Dividend Distributable		$ 2,810,000
	( To record the common stock dividend declared)
b - (2)	Common Stock Dividend Distributable	$ 2,810,000
	Common Stock		$ 2,810,000
	( To record the common stock dividend issued)
c - (1)	No entry	-	-
	(Since not required for Stock Split declared)
c - (2)	No entry	-	-