Question

Prepare Journal Entries in good form for the following (unrelated) equity transactions:

1) Billbo Company issues 1,000 $.01 par stock for $10 cash per share on February 1st.

2) Conner's directors declare a 10% stock dividend on December 31st. This stock dividend of 500 shares, computed as %10 of its 5,000 outstanding shares, is to be distributed on January 20 to stockholders of record on January 15th. The market price of the stock on December 31st. is $15.

3) David Company's board of directors declares a $1 per share cash dividend on the 1,000 outstanding shares on January 9th.

Answer 1

Solution:

Journal Entries
Event	Date	Particulars	Debit	Credit
1	1-Feb	Cash Dr	$10,000.00
		To Common stock		$10.00
		To Paid in capital in excess of par - common stock		$9,990.00
		(To record issue of common shares)
2	31-Dec	Stock dividends Dr	$7,500.00
		To Common stock dividend distributable		$7,500.00
		(To record declaration of stock dividend)
3	20-Jan	Common stock dividend distributable Dr	$7,500.00
		To Common stock		$5.00
		To Paid in capital in excess of par - common stock		$7,495.00
		(To record distribution of stock dividend)
4	9-Jan	Dividends Dr	$1,000.00
		To Dividend payable		$1,000.00
		(To record declaration of cash dividend)