Question

***Please complete the "Total market value of shares for Feb 5th and Feb 28th

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

Common stock—$15 par value, 150,000 shares authorized, 71,000 shares issued and outstanding	$	1,065,000
Paid-in capital in excess of par value, common stock		525,000
Retained earnings		675,000
Total stockholders’ equity	$	2,265,000

On February 5, the directors declare a 16% 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. The stock’s market value is $35 per share on February 28

1. Prepare entries to record both the dividend declaration and its distribution.

No.	Date	General Journal	Debit
1	Feb 05	Retained earning
2	Feb 28	Common stock dividend distributable

2. One stockholder owned 750 shares on February 5 before the dividend. Compute the book value per share and total book value of this stockholder’s shares immediately before and after the stock dividend of February 5. (Round your "Book value per share" answers to 3 decimal places.)

	Before	After
Book Value per share

On February 5, the directors declare a 16% 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. The stock’s market value is $35 per share on February 28.

3. Compute the total market value of the investor’s shares in part 2 as of February 5 and February 28.

	February 5	February 28
Total Market value of shares

Please complete the "Total market value of shares for Feb 5th and Feb 28th

Answer 1

Requirement – 1

Journal Entries for Dividend Declaration and It’s distribution

Date	Particulars	Debit	Credit
Feb 5	Retained Earnings (71,000 x 16% x $41)	465,760
	Common stock dividend distributable (71,000 x 16% x $15)		170,400
	Paid in capital in excess of par value, common stock ($465,760 - $295360)		295,360
	(Entry to record the Declaration of 16% Stock Dividend)
Feb 28	Common stock dividend distributable	170,400
	Common stock		170,400
	(Distributed common stock dividend declared on Feb 5)

Requirement – 2

	Before	After
Book value per share	$31,901	$27.501
Total book value of shares	$23,926	$23,926

Book value per share Before

= $22,65,000 / 71,000 Shares

= $31.901 per share

Book value per share After

= $22,65,000 / (71,000 Shares x 116%)

= $27,501 per share

Total book value of shares Before

= 750 Shares x $31.901

= $23,926

Total book value of shares After

= 750 Shares x $27.501 per share

= $23,926

Requirement – 3

	February 5	February 28
Total Market Value of Shares	$30,750	$30,450

February 5

Market value = $41 per share

Total market value = $30,750 (750 Shares x $41 per share)

February 28

Market value = $35 per share

Total market value = $30,450 [(750 Shares x 116%) x $35 per share)