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The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows....

The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows. Common stock—$25 par value, 150,000 shares authorized, 57,000 shares issued and outstanding $ 1,425,000 Paid-in capital in excess of par value, common stock 423,000 Retained earnings 553,000 Total stockholders’ equity $ 2,401,000 On February 5, the directors declare a 2% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $41 per share on February 5 before the stock dividend. 1. Prepare entries to record both the dividend declaration and its distribution.

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Expert Solution

$25 par value shares of common stock outstanding = 57,000
Current market value of 1 common stock = $41
Stock dividend declared = 2%
Number of shares to be issued = 57,000 x 2%
= 1,140
Amount to be debited to retained earnings = Number of shares to be issued x Current market value of 1 common stock
= 1,140 x 41
= $46,740
Amount to be credited to common stock dividend distributable = Number of shares to be issued x Par value per share
= 1,140 X 25
= $28,500
Amount to be credited to Paid in capital, in excess of par - common stock = Number of shares to be issued x (market value of 1 common stock - Par value per share)
= 1,140 x (41 – 25)
= $18,240

Date General journal Debit Credit
Feb-05 Retained earnings $46,740
Common stock dividend distributable $28,500
Paid in capital in excess of par value $18,240
( To record declaration of stock dividend)
Feb-28 Common stock dividend distributable $28,500
Common stock $28,500
( To record issue of dividend shares)

ekkarill92 answered 1 year ago
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