PI5.11 (LO 3, 4) (Stock and Cash Dividends) Earnhart Corporation has outstanding 3,000,000 shares of common stock with a par value of $10 each. The balance in its Retained Earnings account at January 1, 2020, was $24,000,000, and it then had Paid-in Capital in Excess of Par-Common Stock of $5,000,000. During 2020, the company's net income was $4,700,000. A cash dividend of 50.60 a share was declared on May 5, 2020, and was paid June 30, 2020, and a 6% stock dividend was declared on November 30, 2020, and distributed to stockholders of record at the close of business on December 31, 2020. You have been asked to advise on the proper accounting treatment of the stock dividend. The existing stock of the company is quoted on a national stock exchange. The market price of the stock has been as follows. October 31, 2020 November 30, 2020 December 31, 2020 $31 $34 $38 Instructions a. Prepare the journal entry to record the declaration and payment of the cash dividend b. Prepare the journal entry to record the declaration and distribution of the stock dividend c. Prepare the stockholders' equity section (including schedules of retained earnings and additional paid-in capital) of the balance sheet of Earnhart Corporation for the year 2020 on the basis of the foregoing information. Draft a note to the financial statements setting forth the basis of the account- ing for the stock dividend, and add separately appropriate comments or explanations regarding the t basis chosen. Problems 15-47
PI5.11 (LO 3, 4) (Stock and Cash Dividends) Earnhart Corporation has outstanding 3,000,000 shares of common stock with a par value of $10 each. The balance in its Retained Earnings account at January 1, 2020, was $24,000,000, and it then had Paid-in Capital in Excess of Par-Common Stock of $5,000,000. During 2020, the company's net income was $4,700,000. A cash dividend of 50.60 a share was declared on May 5, 2020, and was paid June 30, 2020, and a 6% stock dividend was declared on November 30, 2020, and distributed to stockholders of record at the close of business on December 31, 2020. You have been asked to advise on the proper accounting treatment of the stock dividend. The existing stock of the company is quoted on a national stock exchange. The market price of the stock has been as follows. October 31, 2020 November 30, 2020 December 31, 2020 $31 $34 $38 Instructions a. Prepare the journal entry to record the declaration and payment of the cash dividend b. Prepare the journal entry to record the declaration and distribution of the stock dividend c. Prepare the stockholders' equity section (including schedules of retained earnings and additional paid-in capital) of the balance sheet of Earnhart Corporation for the year 2020 on the basis of the foregoing information. Draft a note to the financial statements setting forth the basis of the account- ing for the stock dividend, and add separately appropriate comments or explanations regarding the t basis chosen. Problems 15-47
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter16: Retained Earnings And Earnings Per Share
Section: Chapter Questions
Problem 3P: On January 1, 2019, Kittson Company had a retained earnings balance of 218,600. It is subject to a...
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Transcribed Image Text:P15.11 (LO 3, 4) (Stock and Cash Dividends) Earnhart Corporation has outstanding 3,000,000
shares of common stock with a par value of $10 each. The balance in its Retained Earnings account at
January 1, 2020, was $24,000,000, and it then had Paid-in Capital in Excess of Par-Common Stock of
$5,000,000. During 2020, the company's net income was 54,700,000. A cash dividend of $0.60 a share
was declared on May 5, 2020, and was paid June 30, 2020, and a 6% stock dividend was declared on
November 30, 2020, and distributed to stockholders of record at the close of business on December 31.
2020. You have been asked to advise on the proper accounting treatment of the stock dividend.
The existing stock of the company is quoted on a national stock exchange. The market price of the
stock has been as follows.
October 31, 2020
November 30, 2020
December 31, 2020
$31
$34
$38
Instructions
a. Prepare the journal entry to record the declaration and payment of the cash dividend
b. Prepare the journal entry to record the declaration and distribution of the stock dividend
c. Prepare the stockholders' equity section (including schedules of retained earnings and additional
paid-in capital) of the balance sheet of Earnhart Corporation for the year 2020 on the basis of the
foregoing information. Draft a note to the financial statements setting forth the basis of the account
ing for the stock dividend, and add separately appropriate comments or explanations regarding the
basis chosen.
Problems 15-47
21 Excel (Treas
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