Explain how to calculate the after stock dividend to enter on the Balance Sheet.At the beginning of the year, the stockholders' equity section of the balance sheet of Solutions Corporation reflected the following:    Common stock ($12 par value; 65,000 shares authorized, 30,000 shares outstanding)$360,000 Additional paid-in capital 120,000 Retained earnings 580,000   On February 1, the board of directors declared a 60 percent stock dividend to be issued April 30. The market value of the stock on February 1 was $15 per share. The market value of the stock on April 30 was $18 per share. Required:1. For comparative purposes, prepare the Stockholders’ Equity section of the balance sheet immediately before the stock dividend and immediately after the stock dividend.

Question
Asked Oct 31, 2019
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Explain how to calculate the after stock dividend to enter on the Balance Sheet.

At the beginning of the year, the stockholders' equity section of the balance sheet of Solutions Corporation reflected the following:

       
Common stock ($12 par value; 65,000 shares authorized, 30,000 shares outstanding) $ 360,000  
Additional paid-in capital   120,000  
Retained earnings   580,000  
 

 

On February 1, the board of directors declared a 60 percent stock dividend to be issued April 30. The market value of the stock on February 1 was $15 per share. The market value of the stock on April 30 was $18 per share.

 

Required:

1. For comparative purposes, prepare the Stockholders’ Equity section of the balance sheet immediately before the stock dividend and immediately after the stock dividend.

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Expert Answer

Step 1

A Stock Dividend is the payment of dividends in the forms of shares of the company. In cash crunch situations company opt for the issue of the stock dividends. There are 2 types of stock dividends, when the value of the stock dividend is less than 25% of the total value of shares outstanding before the issue of dividend, then it is known as Small stock dividend. Issue of the Stock dividend for more than 25% is known as the Large Stock dividend.

Step 2

Given:

Common Stock 30,000 shares@ $12 per share
$360,000
Retained Earnings
= $580,000
= 60%
Stock Dividend
As the value of stock dividend is 60%, this is a form of Large Stock Dividend
Value of Stock Dividend = 30,000*60%*12
S216,000
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Common Stock 30,000 shares@ $12 per share $360,000 Retained Earnings = $580,000 = 60% Stock Dividend As the value of stock dividend is 60%, this is a form of Large Stock Dividend Value of Stock Dividend = 30,000*60%*12 S216,000

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Step 3

Journal Ent...

Journal entry in the books of Solution Corporation
Ref Debit
Credit
Date
Particulars
01
Feb Retained Earnings A/c
To Common Stock Dividend Distributable A/c
Dr
216000
216000
(Being, entry passed on stock dividend declaration
date)
30-
Apr
Common Stock Dividend Distributable A/c
216000
To Common Stock A/c
216000
(Being, entry passed when shares are distributed to
stockholders)
help_outline

Image Transcriptionclose

Journal entry in the books of Solution Corporation Ref Debit Credit Date Particulars 01 Feb Retained Earnings A/c To Common Stock Dividend Distributable A/c Dr 216000 216000 (Being, entry passed on stock dividend declaration date) 30- Apr Common Stock Dividend Distributable A/c 216000 To Common Stock A/c 216000 (Being, entry passed when shares are distributed to stockholders)

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