The balances of the equity accounts fo the Zap Corporation are presented below: Common stock, $20...

The balances of the equity accounts fo the Zap Corporation are presented below:

Common stock, $20 par, 50,000 shares authorized, 20,000 shares issued

And outstanding----------------------------------------------------------$400,000

Premium on common stock----------------------------------------------- 10,000

Retained earnings --------------------------------------------------------- 100,000

REQUIRED: Based on the above information, complete the following:

The journal entry for the declaration of a 5% stock dividend when the market value of Zap Corporation is $21 per share.

The journal entry for the declaration of a cash dividend of $1.50 per share prior to the stock dividend in part (A).

Expert Solution

WORKING NOTES:
		CALCULATION OF TOTAL VALUE OF STOCK DIVIDEND IS PAID
		Numer of Common Shares Issued and outstanding = (A)	20,000	Shares
		Stock Dividend Declared % of total shares issued and outstanding (B)	5%
		Stock Dividend Declared Shares to be issued (C = AXB)	1,000	Shares
		Market Value of 1 Shares on date of declaration (D)	$ 21	Per Shares
		Par Value of the one shares ('E)	$ 20	Per Shares
		Addittional Paid in Captial (Market Value - Par Value) (F)	$ 1	Per Shares

		Total value of dividend = (CXD)	$ 21,000
		Par value of the Common Stock Dividend (CXE)	$ 20,000
		Value of Addittional paid in Capital (CXF)	$ 1,000


SOLUTION : 1

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

1	-------	Retained Earnings	$ 21,000
		Stock Dividend Distributable		$ 20,000
		Paid in Capital in Excess of Par - Common Stock		$ 1,000
		(To record the stock dividend declaration)




SOLUTION : 2

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

1	-------	Retained Earnings (20,000 Shares X $ 1.50)	$ 30,000
		Dividend Payable - Common Stock		$ 30,000
		(To record the cash dividend declaration)

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