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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—$15 par value, 150,000 shares authorized, 70,000 shares issued and outstanding $ 1,050,000 Paid-in capital in excess of par value, common stock 525,000 Retained earnings 675,000 Total stockholders’ equity $ 2,250,000 On February 5, the directors declare a 18% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $41 per share on February 5 before the stock dividend. The stock’s market value is $35 per share on February 28. Exercise 11-6 Part 1 1. Prepare entries to record both the dividend declaration and its distribution.

Solutions

Expert Solution

Stock Dividend:

When a company issues new shares to it's existing shareholders in the form of dividend such an issue of shares can be termed as a Stock dividend. Such a dividend is issued by utilizing the balance of retained earnings.

Calculations:

Retained earnings = [70,000 Shares X $41 (Market Price)] X 18% = $516,660

Common stock dividend distributable =[ 70,000 Shares X $15 (Par Value) ] X 18% = $189,000

Paid-in capital in excess of par value, common stock = [70,000 Shares X ($41 - $15) ] X 18% = $327,600

ekkarill92 answered 2 years ago
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