Question

The stockholders’ equity accounts of Sarasota Company have the following balances on December 31, 2017.

Common stock, $10 par, 281,000 shares issued and outstanding $2,810,000

Paid-in capital in excess of par—common stock 1,220,000 Retained earnings 5,600,000

Shares of Sarasota Company stock are currently selling on the Midwest Stock Exchange at $34.

Prepare the appropriate journal entries for each of the following cases. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

(a) A stock dividend of 6% is (1) declared and (2) issued.

(b) A stock dividend of 100% is (1) declared and (2) issued.

(c) A 2-for-1 stock split is (1) declared and (2) issued.

Answer 1

(a) A stock dividend of 6% is (1) declared and (2) issued.
The following journal entry will be prepared when the stock dividend is declared:
Account Titles	Debit	Credit
Retained Earnings (281,000 x 6% x $34)	573240
Paid-in Capital in Excess of Par - Common Stock (281,000 x 6% x $24)		404640
Common Stock Dividends Distributable (281,000 x 6% x $10)		168600
The following journal entry will be prepared when the stock dividend is issued:
Account Titles	Debit	Credit
Common Stock Dividends Distributable	168600
Common Stock		168600
(b) A stock dividend of 100% is (1) declared and (2) issued.
The following journal entry will be prepared when the stock dividend is declared:
Account Titles	Debit	Credit
Retained Earnings (281,000 x 6% x $10)	168600
Common Stock Dividends Distributable (281,000 x 6% x $10)		168600
The following journal entry will be prepared when the stock dividend is issued:
Account Titles	Debit	Credit
Common Stock Dividends Distributable	168600
Common Stock		168600
(c) A 2-for-1 stock split is (1) declared and (2) issued.
No journal entry is required in case of a stock split. Therefore, no journal entry.