Question

Douglas McDonald Company’s balance sheet included the following shareholders’ equity accounts at December 31, 2017:

($ in millions)
Paid-in capital:
Common stock, 1,550 million shares at $1 par $ 1,550
Paid-in capital—excess of par 17,100
Retained earnings 15,863
Total shareholders’ equity $ 34,513
On March 16, 2018, a 4% common stock dividend was declared and distributed. The market value of the common stock was $34 per share. Fractional share rights represented 3 million equivalent whole shares. Cash was paid in lieu of the fractional share rights.
Required:
1. Complete the below table to calculate the value of shares issued.
2. Prepare the appropriate entries for the declaration and distribution of the stock dividend.

Answer 1

1. Stock Dividend

Number of outstanding shares A $1,550

Stock dividend percentage B 4%

Numbers of shares to be issued C=A*B $62

Market value per share D $34

Value of Stock dividend E=C*D $2,108

Amount paid in cash for fractional shares F $102

Value of shares issued E-F $2,006

2. General Journal Debit Credit

Retained Earnings $2,108

Common Stock $59

Paid-in Capital - excess in par $1,947

Cash $102

(To record distribution of the stock dividend)