Question

Selected Dividend Transactions, Stock Split

Selected transactions completed by Canyon Ferry Boating Corporation during the current fiscal year are as follows.

Journalize the transactions.

If no entry is required, select "No entry required" and leave the amount boxes blank. If an amount box does not require an entry, leave it blank.

Jan. 8. Split the common stock 2 for 1 and reduced the par from $28 to $14 per share. After the split, there were 72,000 common shares outstanding.

Jan. 8.

Apr. 30. Declared semiannual dividends of $1.20 on 5,000 shares of preferred stock and $0.11 on the common stock payable on July 1.

Apr. 30.

July 1. Paid the cash dividends.

July 1.

Oct. 31. Declared semiannual dividends of $1.20 on the preferred stock and $0.10 on the common stock (before the stock dividend). In addition, a 1% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $25.

Cash Dividends
Stock dividends

Dec. 15. Paid the cash dividends and issued the certificates for the common stock dividend.

Payment
Issuance

Answer 1

Journal Entries:

Jan 8 No journal entry is required for stock split only memorandum entry is enough.

April 30

Retained Earnings a/c dr. $13,920.

To preferred stocks dividend payable a/c. $ 6000

To equity stocks dividend payable a/c. $7920.

( Being dividend decleared for preferred stock $6000 ( $1.20 × 5000 ) & equity shares $7920 ( 0.11 × 72,000 ).

July 1

Preferred stocks Dividend payable a/c dr. $ 6000.

Equity stocks Dividend payable a/c dr. $7920.

To Cash / Bank a/c. $13,920.

( Being dividend paid ).

October 31

Cash dividend:

Retained Earnings a/c dr. $ 13,200.

To Preferred Stocks Dividend Payable a/c. $6000.

To Equity stocks dividend payable a/c $7200.

(Being declared dividend for preferred stocks $ 6000 ( $1.20 × 5000) and equity shares $7200 ( $0.10×72,000).

Stock Dividend

Retained Earnings a/c dr. $ 18,000. ( 720 × $25 FMV ).

To Common stocks a/c. $10,080 (720×$14 Par value ).

To APIC - C/S * a/c. $7,920 (720 × $11 ).

( Being 1% stock dividend recorded at $25 fair market value ).

* Additional paid up capital for common stock represents amount in excess of par value.

December 15.

Cash dividend

Preferred stocks Dividend Payable a/c dr. $6000.

Equity stocks Dividend Payable a/c dr. $7200.

To Cash/ Bank a/c. $13,200.

(Being dividend paid ).

Stock Dividend Certificate issue.

No entry is required.

Notes :

Stock Dividend- Small stocks Dividends ( usually less than 20% ) recoreded at FAIR MARKET VALUE of the stocks when decleared.