Question

The shareholders’ equity of Core Technologies Company on June 30, 2020, included the following: Common stock, $1 par; authorized, 8 million shares; issued and outstanding, 3 million shares $ 3,000,000 Paid-in capital—excess of par 12,000,000 Retained earnings 14,000,000 On April 1, 2021, the board of directors of Core Technologies declared a 10% stock dividend on common shares, to be distributed on June 1. The market price of Core Technologies’ common stock was $30 on April 1, 2021, and $40 on June 1, 2021.Complete the below table to calculate the stock dividend. Prepare the journal entries to record the declaration and distribution of the stock dividend.

Answer 1

Answer:

Explanation:

Before recording the journal entries first we have to determine the stock dividend which is shown below:

= Number of outstanding shares × stock dividend percentage × market price  on April 1

= 3,000,000 shares × 10% × $30

= $9,000,000

The Number of outstanding shares × stock dividend percentage = Issued shares

The journal entries are shown below:

On April 1, 2021

Retained earnings A/c Dr $9,000,000

      To Common stock dividends distributable $300,000

      To Paid-in capital—Excess of par $8,700,000

(Being the declaration of dividend is recorded and the remaining balance is credited to the Paid-in capital—Excess of par)

On June 1, 2021

Common stock dividends distributable A/c Dr $300,000

       To Common stock $300,000

(Being distribution of the stock dividend is recorded)