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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Stock Dividend The shareholders’ equity of Raven Company is as shown:

Chapter 16, Problem 4E, Stock Dividend The shareholders equity of Raven Company is as shown: Raven is considering the

Raven is considering the declaration and issuance of a stock dividend at a time when the market price is $30 per share.

Required:

  1. 1. Assuming the board of directors recommends a 6% stock dividend, prepare:
    1. a. the journal entry at the date of declaration
    2. b. the journal entry at the date of issuance
    3. c. shareholders’ equity after the issuance
  2. 2. Assuming, instead, that a 40% stock dividend is recommended, answer a, b, and c of Requirement 1.

1. a

To determine

Prepare journal entry to record the given transaction.

Explanation

Dividends:

This is the amount of cash distributed to stockholders by a company out its earnings, according to their proportion of shares invested in the company.

Stock dividends:

Stock dividends are the number of shares issued by a company to the existing shareholders in a proportion to the number of shares owned by each shareholder, based on a stock dividend percentage.

DateAccount Titles and explanationDebit ($)Credit ($)
 Retained earnings (25,000×6%×$30)45,000 
 

     Common stock to be distributed

     (&

1. b

To determine

Prepare journal entry to record the given transaction.

1. c

To determine

Calculate the shareholder’s equity after the issuance.

2. a

To determine

Prepare journal entry to record the given transaction.

2. b

To determine

Prepare journal entry to record the given transaction.

2. c

To determine

Calculate the shareholder’s equity after the issuance.

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