Question

The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows: Common stock—$5 par value, 150,000 shares authorized, 55,000 shares issued and outstanding $ 275,000 Paid-in capital in excess of par value, common stock 525,000 Retained earnings 675,000 Total stockholders’ equity $ 1,475,000 On February 5, the directors declare a 12% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $45 per share on February 5 before the stock dividend. The stock’s market value is $40 per share on February 28.

1. Prepare entries to record both the dividend declaration and its distribution.
2. One stockholder owned 650 shares on February 5 before the dividend. Compute the book value per share and total book value of this stockholder’s shares immediately before and after the stock dividend of February 5. (Round your "Book value per share" answers to 3 decimal places.)
3. Compute the total market value of the investor’s shares in part 2 as of February 5 and February 28.

Answer 1

Solution 1:
Journal Entries - TVX Company
Date	Particulars	Debit	Credit
5-Feb	Retained earnings Dr (55000*12%*$45)	$297,000.00
	To Common stock dividend distributable		$33,000.00
	To Paid in capital in excess of par - common stock		$264,000.00
	(To record stock dividend declared)
28-Feb	Common stock dividend distributable Dr	$33,000.00
	To Common stock		$33,000.00
	(To record issue of stock dividend)

Solution 2:
Computation of book value per share and total book value
Particulars	Before stock dividend	After stock dividend
Total stockholder's Equity	$1,475,000.00	$1,475,000.00
Total outstanding shares	55000	61600
Book value per share	$26.818	$23.945
Nos of share held by investor	650	728
Total book value of shares held	$17,432	$17,432

Solution 3:
Computation of market value of share held by investor
Particulars	5-Feb	28-Feb
Nos of share held by investor	650	728
Market value per share	$45.00	$40.00
Total market value of shares	$29,250.00	$29,120.00