Problem 13-2 Prepare journal entries for cash dividend and small stock dividend

Question

Problem 13-2

Prepare journal entries for cash dividend and small stock dividend (L.O. 2)

The only stockholders’ equity items of Jody Company at June 30, 2011, are:

Stockholders’ Equity:
Paid in Capital:

Common Stock= $200 par value, 10,000 shares authorized,
6000 shares issued and outstanding.                                                  1,200,000
Paid in capital in excess of par value                                                   480,000
Total paid in capital                                                                                                 1680,000
Retained Earnings                                                                                                      480,000

Total Stockholders’ Equity                                                                                       2,160,000

On August 4, 2011, a 4% cash dividend was declared, payable on September 3. On November 16, a 10% stock dividend was declared. The shares were issued on December 1. The market value of the common stock was $360 per share on November 16 and $354 per share on December 1.

Required

Prepare journal entries for these dividend transactions.

Explanation / Answer

Journal entries

account & explanation

Date

account & explanation

Debit credit Aug 4,2011 dividend 48000 Dividend payable 48000 (To record dividend declared) Sep 3,2011   dividend payable 48000 Cash 48000 (to record dividend paid) 2011 nov 1 retained earnings 216000 Common stock dividend distributable 120000 Paid in capital in excess of par value 96000 (to record stock dividend declared) 2011 dec 1 common stock dividend distributable 120000 Common stock 120000 (to record stock issued)

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