Stock Dividends On August 1, 2020, Perkins declares a 15% Common Stock dividend. The market (fair)...

Stock Dividends

On August 1, 2020, Perkins declares a 15% Common Stock dividend. The market (fair) value of the stock on August 1, 2020, is $30 per share. August 15, 2020, is the date of record. The stock dividend will be distributed on August 31, 2020. Instructions: (a) Prepare all required journal entries for August 1, 15, and 31, 2020. If no journal entry is required, state NA. (b) Assume that Perkins declares a 30% Common Stock dividend instead of a 15% stock dividend. Prepare all required journal entries for August 1, 15, and 31, 2020. If no journal entry is required, state NA

Expert Solution

WORKING NOTES:
		CALCULATION OF TOTAL VALUE OF DIVIDEND IS PAID
		Numer of Common Shares outstanding (A) =	1,00,000	Shares
		Stock Dividend Declared (B)	15%
		Stock Dividend (C = AXB)	15,000	Shares
		Par value of the one shares	$ 10	Per Shares
		Market Value of the one Share (D)	$ 30	Per Shares
		Addittinal paid in capital in excess of par (Market Value - Par Value) (E)	$ 20	Per Shares
		Total value of Stock Dividend( C X D)	$ 4,50,000
		Par value of the Stock Dividend ( C X Par Value)	$ 1,50,000
		Addittinal paid in capital in excess of par = (C X E)	$ 3,00,000

SOLUTION : A

Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit

1	Aug 01, 2020	Retained Earnings	$4,50,000
		Common Stock dividend distributable		$1,50,000
		Paid in Capital in Excess of par		$3,00,000


2	Aug 15, 2020	"No Journal Entry is required for record date"




3	Aug 31, 2020	Common Stock dividend distributable	$3,00,000
		Common Stock		$3,00,000



WORKING NOTES:
		CALCULATION OF TOTAL VALUE OF DIVIDEND IS PAID
		Numer of Common Shares outstanding (A) =	1,00,000	Shares
		Stock Dividend Declared (B)	30%
		Stock Dividend (C = AXB)	30,000	Shares
		Par value of the one shares	$ 10	Per Shares
		Market Value of the one Share (D)	$ 30	Per Shares
		Addittinal paid in capital in excess of par (Market Value - Par Value) (E)	$ 20	Per Shares
		Total value of Stock Dividend( C X D)	$ 9,00,000
		Par value of the Stock Dividend ( C X Par Value)	$ 3,00,000
		Addittinal paid in capital in excess of par = (C X E)	$ 6,00,000

SOLUTION : A

Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit

1	Aug 01, 2020	Retained Earnings	$9,00,000
		Common Stock dividend distributable		$3,00,000
		Paid in Capital in Excess of par		$6,00,000


2	Aug 15, 2020	"No Journal Entry is required for record date"




3	Aug 31, 2020	Common Stock dividend distributable	$6,00,000
		Common Stock		$6,00,000

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