Question

The stockholders’ equity accounts of Stellar Company have the following balances on December 31, 2017.

Common stock, $10 par, 285,000 shares issued and outstanding		$2,850,000
Paid-in capital in excess of par—common stock		1,230,000
Retained earnings		5,240,000

Shares of Stellar Company stock are currently selling on the Midwest Stock Exchange at $38.

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 8% 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

		Stellar Company
	S.no.	Particular	Debit	Credit
	1)	Retained Earnings=(285000*8%*$38)	$      866,400.00
		To Common Stock Dividend distributable=(285000*8%)*$10		$      228,000.00
		To Paid in Capital excess of Par=(285000*8%*$28)		$      638,400.00
		(Being amount of stock dividend of 5% is declared )
		Common Stock Dividend distributable	$      228,000.00
		To Common Stock		$      228,000.00
		(Being amount of stock dividend of 5% is issued )
	2)	Retained Earnings=(285000*100%)	$ 2,850,000.00
		To Dividend distributable=(285000*100%)*$10		$ 2,850,000.00
		(being amount of 100% stock dividend declared)
		Common Stock Dividend distributable	$ 2,850,000.00
		To Common Stock		$ 2,850,000.00
		(Being amount of 100% stock dividend issued)
	3)	No Journal Entry Required because in this case par value $5 and shares outstanding increases to (285000*2/1)=570000