Question

Problem 15-11 Whispering Corporation has outstanding 3,020,000 shares with common stock of a par value of $10 each. The balance in its Retained Earnings account at January 1, 2017, was $24,148,000, and it then had Paid-in Capital in Excess of Par—Common Stock of $4,994,000. During 2017, the company’s net income was $4,653,000. A cash dividend of $0.60 a share was declared on May 5, 2017, and was paid June 30, 2017, and a 6% stock dividend was declared on November 30, 2017, and distributed to stockholders of record at the close of business on December 31, 2017. You have been asked to advise on the proper accounting treatment of the stock dividend. The existing stock of the company is quoted on a national stock exchange. The market price of the stock has been as follows. October 31, 2017 $28 November 30, 2017 $31 December 31, 2017 $34 (a) Prepare the journal entry to record (1) the declaration and (2) payment of the cash dividend. (b) Prepare the journal entry to record (1) the declaration and (2) distribution of the stock dividend. (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.) No. Date Account Titles and Explanation Debit Credit (a) (1) (a) (2) (b) (1) (b) (2) SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Prepare the stockholders’ equity section (including schedules of retained earnings and additional paid-in capital) of the balance sheet of Whispering Corporation for the year 2017 on the basis of the foregoing information. (List items that increase retained earnings first.) Schedule of Additional Paid-in Capital $ $ Statement of Retained Earnings $ : : $ $ WHISPERING CORPORATION Stockholders’ Equity $ $

Answer 1

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a & b. Journal Entries:
Date	Account	Debit	Credit
5 May 2017	Retained Earning (3020000*0.6)	$   1,812,000
	Dividend Payable		$ 1,812,000
	(to record declaration of cash dividends)
30 Jun 2017	Dividend Payable	$   1,812,000
	Cash		$ 1,812,000
	(to record payment of cash dividend)
Nov 30 2017	Retained Earning 181200*31	$   5,617,200
	Common stock Dividend Distributable 181200*10		$ 1,812,000
	Paid in Capital-in excess of par-Common		$ 3,805,200
	(to record declaration of stock dividends)
Working:	No of Stock being issued in Dividend	3020000*6%	181,200
Dec 31 2017	Common stock Dividend Distributable 181200*10	$   1,812,000
	Common Stock		$ 1,812,000
	(to record distribution of stock dividends)
	Stockholder's Equity
	Common Stock-$10 par value, issued 3201200 Shares		$32,012,000
	Additional Paid in Capital		$ 8,799,200
	Retained Earning		$21,371,800
	Total Stockholder's Equity		$62,183,000
	Statement of Retained Earning
	Beginning Balance		$24,148,000
	Less: Cash Dividend Paid		$ 1,812,000
	Less: Stock Dividend Paid		$ 5,617,200
	Add: Net Income		$ 4,653,000
	Ending Balance		$21,371,800
	Schedule of additional Paid in Capital
	Beginning Balance		$ 4,994,000
	Add: on Stock Dividend		$ 3,805,200
	Ending Balance		$ 8,799,200