Question

On September 1, the board of directors of Colorado Outfitters, Inc., declares a stock dividend on its 22,000, $13 par, common shares. The market price of the common stock is $42 on this date Required: 1. 2. & 3. Record the necessary journal entries assuming a small (10%) stock dividend, a large (100%) stock dividend, and a 2-for-1 stock split.

Answer 1

(I)

retained earnings 92,400 debit

common stock 28,600 credit

additional paid-in 63,800 credit

(II)

retained earnings 924,000 debit

common stock 286,000 credit

additional paid-in 638,000 credit

(III) no entry required

Step-by-step explanation:

22,000 x 10% = 2,200 new shares

market price:

2,200 X $42 = 92,400

book value

2,200 x $13 = 28,600

additional paid-in

63,800

100% sotkc dividends:

22,000 x 100% = 22,000 new shares

market price:

22,000 X $42 = 924,000

book value

22,000 x $13 = 286,000

additional paid-in

638,000

the stock split will not change the accounting as the total value fo the equity remains the same.