Question

On September 1, the board of directors of Colorado Outfitters, Inc., declares a stock dividend on its 16,000, $7 par, common shares. The market price of the common stock is $36 on this date.
Record the necessary journal entries assuming a small (10%) stock dividend, a large (100%) stock dividend, and a 2-for-1 stock split. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer:

See the answers and explanation below.

Explanation:

a. the necessary journal entries assuming a small (10%) stock dividend

Date       Details                                                           Dr ($)            Cr ($)

Sept. 1    Stock Dividends (16,000 * 36 * 10%)               57,600

              Common Stock (16,000 * 7 *10%)                                      11,200

              Additional Paid-in Capital - Common Stock                    46.400

              To record a small (10%) stock dividend on common stock.    .

b. the necessary journal entries assuming a large (100%) stock dividend

Date       Details                                                          Dr ($)            Cr ($)

Sept. 1    Stock Dividends (16,000 * 7 * 100%)              112,000

              Common Stock (16,000 * 7 *10%)                                      112,000

              To record a large (100%) stock dividend on common stock.   .

c. the necessary journal entries assuming a 2-for-1 stock split.

"No journal entry required"

Note: Although no journal entry is required here but the number of common stock will increase to 32,000 (i.e. 16,000 * 2 = 32.00).