Question

Part a
On October 1, 2021, Helmsmith Corporation declared and issued a 10% common stock dividend. Before this date,
Helmsmith had 80,000 shares of $1 par common stock outstanding. The market price of Helmsmith Corporation’s
common stock on the date of declaration was $10 per share.
Required
Show Helmsmith’s journal entries to record the common stock dividend on:
1) The date of declaration
2) The date of record
3) The date of distribution/payment

Part b
Despot declared a property dividend to give shares of Orange Computer to its common stockholders. The following
information is available about Despot’s investment in Orange shares:
 Despot paid $7 million for its original investment in Orange
 On the date of declaration, the Orange shares have a fair market value of $16 million.
 On the date of distribution/payment, the Orange shares have a market value of $14 million
Required
Show Despot’s journal entries to record the property dividend on:
1) The date of declaration
2) The date of record
3) The date of distribution/payment

Part c
Mastiff Corporation has 20,000 shares of $10 par common stock outstanding and 10,000 shares of $100 par, 6%
cumulative, nonparticipating preferred stock outstanding. Mastiff has not paid any dividends for the past two years.
This year, Mastiff will pay $300,000 in dividends to its stockholders.
Required
1) What portion of the dividend will be paid to preferred stockholders?
2) What portion of the dividend will be paid to common stockholders?

Answer 1