Question
In: Accounting
The shareholders’ equity of Core Technologies Company on June 30, 2020, included the following: Common stock,...
The shareholders’ equity of Core Technologies Company on June
30, 2020, included the following:
| Common stock, $1 par; authorized, 8 million shares; issued and outstanding, 4 million shares |
$ | 4,000,000 | |
| Paid-in capital—excess of par | 12,000,000 | ||
| Retained earnings | 34,000,000 | ||
On April 1, 2021, the board of directors of Core Technologies
declared a 25% stock dividend on common shares, to be distributed
on June 1. The market price of Core Technologies’ common stock was
$30 on April 1, 2021, and $40 on June 1, 2021.
Required:
1. Prepare the journal entry to record the stock dividend if the
company treats the distribution as normal stock dividends.
2. Prepare the journal entry to record the stock dividend if the company treats the distribution as "large" stock dividends effected in the form of a stock dividend.
3. Prepare the journal entry to record the stock dividend if the company treats the distribution as a stock split.
Solutions
Expert Solution
1. Normal stock dividends:
| Date | Account title and explanation | Debit |
| Apr 1,2021 | Stock dividends [(8,000,000 x 25%) x $30 Market price] | $60,000,000 |
| Common stock dividend distributable [(8,000,000 x 25%) x $1 par] | ||
| Paid-in capital-excess of par | ||
| [To record declaration of stock dividends] | ||
| June 1,2021 | Common stock dividend distributable | $2,000,000 |
| Common stock | ||
| [To record distribution of stock dividends] |
2.Large Stock dividends:
| Date | Account title and explanation | Debit | Credit |
| Apr 1,2021 | Stock dividends | $2,000,000 | |
| Common stock dividend distributable [(8,000,000 x 25%) x $1 par] | $2,000,000 | ||
| [To record declaration of stock dividends] | |||
| June 1,2021 | Common stock dividend distributable | $2,000,000 | |
| Common stock | $2,000,000 | ||
| [To record distribution of stock dividends] |
3. No Entry for stock split
ekkarill92 answered 2 years agoRelated Solutions
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assumptions: the shares are (a) retired and (b) accounted for as
treasury stock.
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