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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Augusta Corporation reported the following information: 35,000 shares of $3 par value common stock authorized, 30,000 shares common stock issued, 10,000 shares treasury stock.

Required:

  1. What is the appropriate journal entry to record a 5% stock dividend if the market price of the common stock is S40 per share when the dividend is declared?
  2. What is the appropriate journal entry to record a 20% stock dividend if the market price of the common stock is S40 per share when the dividend is declared?
  3. CONCEPTUAL CONNECTION How do these transactions affect Augusta’s total stockholders equity?

To determine

Concept introduction:

Stock Dividend:

The Stock dividend is the number of shares given as dividend to the shareholders. The Stock dividend is declared first and shares are issued later. There are two journal entries made, one at the time of declaration of stock dividend and another at the time of issuance of shares.

Requirment-1:

To indicate:

The journal entry to record the declaration of the 5% stock Dividend.

Explanation

The journal entry to record the declaration of the 5% stock Dividend is explained as follows:

Account Titles Debit Credit
To determine

Concept introduction:

Stock Dividend:

The Stock dividend is the number of shares given as dividend to the shareholders. The Stock dividend is declared first and shares are issued later. There are two journal entries made, one at the time of declaration of stock dividend and another at the time of issuance of shares.

Requirment-2:

To indicate:

The journal entry to record the declaration of the 35% stock Dividend.

To determine

Concept introduction:

Stock Dividend:

The Stock dividend is the number of shares given as dividend to the shareholders. The Stock dividend is declared first and shares are issued later. There are two journal entries made, one at the time of declaration of stock dividend and another at the time of issuance of shares.

Requirment-3:

To indicate:

The effect of Stock Dividends on the Stockholder’s equity.

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