Question

Pina Corporation has outstanding 2,973,000 shares of common stock with a par value of $10 each. The balance in its Retained Earnings account at January 1, 2020, was $23,787,000, and it then had Paid-in Capital in Excess of Par—Common Stock of $5,044,000. During 2020, the company’s net income was $4,693,000. A cash dividend of $0.60 a share was declared on May 5, 2020, and was paid June 30, 2020, and a 6% stock dividend was declared on November 30, 2020, and distributed to stockholders of record at the close of business on December 31, 2020. 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, 2020 $33 November 30, 2020 $36 December 31, 2020 $40

(a and b) (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) May 5June 30Nov. 30Dec. 31 (a) (2) May 5June 30Nov. 30Dec. 31 (b) (1) May 5June 30Nov. 30Dec. 31 (b) (2) May 5June 30Nov. 30Dec. 31

Answer 1

Working Notes for A
		CALCULATION OF TOTAL VALUE OF CASH DIVIDEND PAID
		Numer of Common Shares Issued and outstanding = (A)	2,973,000	Shares
		Cash Dividend Per Shares	$                         0.60
		Total Cash Dividend	$              1,783,800
Working Notes for B
		CALCULATION OF TOTAL VALUE OF STOCK DIVIDEND IS PAID 6%
		Numer of Common Shares Issued and outstanding = (A)	2,973,000	Shares
		Stock Dividend Declared % of total shares issued and outstanding (B)	6%
		Stock Dividend Declared Shares to be issued (C = AXB)	178,380	Shares
		Market Value of 1 Shares on date of declaration (D)	$                       36.00	Per Shares
		Par Value of the one shares	$                       10.00	Per Shares
		Addittional Paid in Captial (Market Value - Par Value) (F)	$                       26.00	Per Shares
		Total value of dividend = (CXD)	$              6,421,680
		Par value of the Common Stock Dividend (CXE)	$              1,783,800
		Value of Addittional paid in Capital (CXF)	$              4,637,880
SOLUTION : A
Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit
1	May 05.2020	Retained Earnings	$              1,783,800
		Dividend Payable		$                1,783,800
		(To record the cash dividend declaration)
2	June 30. 2020	Dividend Payable	$              1,783,800
		Cash		$                1,783,800
		(To record the payment of cash dividend)
SOLUTION : B
Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit
1	Nov 30.2020	Retained Earnings	$              6,421,680
		Stock Dividend Distributable		$                1,783,800
		Paid in Capital in Excess of Par - Common Stock		$                4,637,880
		(To record the stock dividend declaration)
2	Dec 31.2020	Stock Dividend Distributable	$              1,783,800
		Common Stock		$                1,783,800
		(To record the stock dividend distribtion)