Problem 5. On January 1, 2016, Kem Corporation had $1,500,000 of common stock ou
ID: 2509618 • Letter: P
Question
Problem 5. On January 1, 2016, Kem Corporation had $1,500,000 of common stock outstanding that was issued at par and retained earnings of $750.000. The company issued 30,000 shares of common stock at par on July 1 and earned net income of $400,000 for the year. Instructions Journalize the declaration of a 15% stock dividends on December 10, 2016 and the payment of the stock dividends on December 31, 2016, for the following two independent assumptions. (a) Par value is $10 and market value is $12. (b) Par value is $5 and market value is S9.Explanation / Answer
a) Retained Earnings Dr 2,70,000
To Dividend payable Cr 2,70,000
(1500000/10=150000+30000=180000*1.5=270,000)
Dividend Payment entry
Dividend Payable Dr 2,70,000
To Cash Cr 2,70,000
b) Retained Earnings Dr 2,47,500
To Dividend payable Cr 2,47,500
(1500000/5=300000+30000=330000*0.75=247,500)
Dividend Payment entry
Dividend Payable Dr 2,47,500
To Cash Cr 2,47,500