Question

Aggregate Mining Corporation was incorporated five years ago. It is authorized to issue 500,000 shares of $100 par value 8% preferred stock. It is also authorized to issue 900,000 shares of $1 par value common stock. It has issued only 40,000 of the common shares and none of the preferred shares. In its sixth year, the corporation has the following transactions: Mar. 1 Declares a cash dividend of $3 per share. Mar. 30 Pays the cash dividend. Jul. 10 Declares a 6% stock dividend when the stock is trading at $20 per share. Aug. S Issues the stock dividend. Prepare the journal entries to record the transactions.

Answer 1

March 1:

Retained Earnings (Dividend Declared) Dr. $120,000 ($3 x 40,000 shares)

Dividends Payable Cr. $120,000

March 30:

Dividends Payable Dr. $120,000

Cash Cr. $120,000

July 10:

Stock Dividends (6% x 40,000 shares x $20) Dr. $48,000

Common Stock Dividends Distributable Cr. $48,000

August:

Common Stock Dividends Distributable Dr. $48,000

Common Stock ($1 par value x 48,000 shares) Cr. $48,000

Explanation: These journal entries reflect the recording of cash dividends, stock dividends, and the associated distributions for the given transactions.