The Monroe Corporation has 100,000 common shares issued and outstanding. This stock was issued several years...

The Monroe Corporation has 100,000 common shares issued and outstanding. This stock was issued several years ago at a price above the $10 per share par value. During the current year, the board of directors declared a 30 percent stock dividend so that 30,000 new shares were issued to the stockholders when the price of the stock was $30 per share. As a result of this dividend, what reduction was recorded in the reported amount of retained earnings ?

__$600,000

__$900,000

__$300,000

__-0-

Expert Solution

WORKING NOTES:
		CALCULATION OF TOTAL VALUE OF DIVIDEND IS PAID
		Numer of Common Shares outstanding =	1,00,000	Shares
		Stock Dividend Declared = 100,000 Shares X 30%	30,000	Shares
		Market Value of 1 Shares on date of declaration	$ 30	Per Shares
		Total value of dividend = 30,000 Shares $ 30 =	$ 9,00,000
		Par value of the 15,000 shares = 30,000 Shares X $ 10	$ 3,00,000
		Addittinal paid in capital in excess of par (Balance )	$ 6,00,000

SOLUTION :	Journal Entry for declaration and payment of stock dividend is as below,

		Account Title and explanation	Debit	Credit

		Retained Earnings	$9,00,000
		Common Stock dividend distributable		$3,00,000
		Paid in Capital in Excess of par		$6,00,000
		(To record the stock dividend declaration)


	It means retaiend earnings is debited with $ 900,000

Answer = Option 2 = $ 900,000

ekkarill92 answered 1 year ago

Apple Corporation owns 60,000 shares of common stock out of the 100,000 shares outstanding of common...

Apple Corporation owns 60,000 shares of common stock out of the 100,000 shares outstanding of common stock of Orange Corporation. On 1/1/2012, using the equity method, Apple recorded its investment in Orange on its book at $480,000. The book value of net assets of Orange Corporation on 1/1/2012 was $800,000. If on 1/2/2012 Orange Corporation repurchased 20,000 shares from outsiders at $6 a share, what adjustment would be needed for Apple’s “Investment in Orange” account after the repurchase? $30,000 increase...

Throughout 2019, H had 15,000,000 shares of common stock issued and outstanding and 100,000 shares of...

Throughout 2019, H had 15,000,000 shares of common stock issued and outstanding and 100,000 shares of 5%, $100 par value cumulative preferred stock issued and outstanding. H's net income for 2019 was $7,700,000. During 2019 H neither declared nor paid any kind of dividend. H's income tax rate is 25%. During the entire year ending 12-31-19, H had 750,000 outstanding and exercisable employee stock options that were granted to employees during 2016. Each option has an exercise price of $40...

Morris Company has the following capital structure: Common stock, $2 par, 100,000 shares issued and outstanding...

Morris Company has the following capital structure: Common stock, $2 par, 100,000 shares issued and outstanding On October 1, 2020, the company declared a 5% common stock dividend when the market price of the common stock was $10 per share. The stock dividend will be distributed on October 15, 2020, to stockholders on record on October 10, 2020. Upon declaration of the stock dividend, Norris Company would record: A. A debit to Retained Earnings for $200,000 B. A credit to...

Headland Corporation has 10.60 million shares of common stock issued and outstanding. On June 1, the...

Headland Corporation has 10.60 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 73 cents per share cash dividend to stockholders of record as of June 14, payable June 30. Prepare the journal entries for each of the dates above assuming the dividend represents a distribution of earnings. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the...

Novak Corporation has 11.80 million shares of common stock issued and outstanding. On June 1, the...

Novak Corporation has 11.80 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 82 cents per share cash dividend to stockholders of record as of June 14, payable June 30. 1. Prepare the journal entries for each of the dates above assuming the dividend represents a distribution of earnings. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for...

Wilson Corporation issued and has outstanding 134,400 shares of $10 par-value common stock and 2,800 shares...

Wilson Corporation issued and has outstanding 134,400 shares of $10 par-value common stock and 2,800 shares of $70 par-value 20 percent preferred stock. The board of directors votes to distribute $4,200 as dividends in 2016, $7,000 in 2017, and $308,000 in 2018. Compute the total dividend and the dividend for each share paid to preferred stockholders and common stockholders each year under the following assumed situations. Case A: The preferred stock is nonparticipating and noncumulative. (Round your per share...

Court Casuals has 100,000 shares of common stock outstanding as of the beginning of the year...

Court Casuals has 100,000 shares of common stock outstanding as of the beginning of the year and has the following transactions affecting stockholders' equity during the year. May 18 Issues 25,000 additional shares of $1 par value common stock for $35 per share. May 31 Repurchases 6,000 shares of treasury stock for $44 per share. July 1 Declares a cash dividend of $1 per share to all stockholders of record on July 15. Hint: Dividends are not paid on treasury...

Lotoya Davis Corporation has 11.44 million shares of common stock issued and outstanding. On June 1,...

Lotoya Davis Corporation has 11.44 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 69 cents per share cash dividend to stockholders of record as of June 14, payable June 30. (a) Prepare the journal entry for each of the dates above assuming the dividend represents a distribution of earnings. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry"...

create journal entries: Common stock—$10 par value, 100,000 shares authorized, 55,000 shares issued and outstanding $...

create journal entries: Common stock—$10 par value, 100,000 shares authorized, 55,000 shares issued and outstanding $ 550,000 Paid-in capital in excess of par value, common stock 80,000 Retained earnings 460,000 Total stockholders’ equity $ 1,090,000 In year 2016, the following transactions affected its stockholders’ equity accounts. Jan. 1 Purchased 5,000 shares of its own stock at $20 cash per share. Jan. 5 Directors declared a $4 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of...

Common stock—$20 par value, 100,000 shares authorized, 55,000 shares issued and outstanding $1,100,000 Paid-in capital in...

Common stock—$20 par value, 100,000 shares authorized, 55,000 shares issued and outstanding $1,100,000 Paid-in capital in excess of par value, common stock 70,000 Retained earnings 430,000 Total stockholders' equity $1,600,000 In year 2017, the following transactions affected its stockholders’ equity accounts. Jan. 1 Purchased 4,500 shares of its own stock at $25 cash per share. Jan. 5 Directors declared a $6 per share cash dividend payable on February 28 to the February 5 stockholders of record. Feb. 28 Paid the...

Question