Question

Journalize the following selected transactions completed during the current fiscal year:

Jan. 3 The board of directors declared a stock split which reduced the par of common shares from $100 to $20. This action increased the number of outstanding shares to 400,000.
22 Declared a dividend of $1.75 per share on the outstanding shares of common stock.
Feb. 8 Paid the dividend declared on January 22.
Sep. 1 Declared a 5% stock dividend on the common stock outstanding (the fair market value of the stock to be issued is $30).
Oct. 1 Issued the certificates for the common stock dividend declared on September 1.

Answer 1

Transactions include declaring and paying cash dividends, declaring and issuing stock dividends, and a stock split. The journal entries reflect the declaration of dividends, setting up dividends payable, and the payment of dividends, whereas no entry is required for a stock split.

Step-by-step explanation:

Journalizing Transactions in Accounting

On January 3, the company executed a stock split which adjusted the par value of common shares from $100 to $20 and increased the number of outstanding shares to 400,000. No journal entry is required for the stock split as it is merely a reduction in par value and an increase in the number of shares.

On January 22, the company declared a dividend of $1.75 per share. This would be recorded as follows:

Dividends Payable 700,000

Dividends Payable 700,000

Common Stock Dividend Distributable 80,000

Paid-in Capital in Excess of Par 520,000

On October 1, the company issued the stock certificates for the declared stock dividend from September 1. This transaction has no effect on the general ledger accounts and typically does not require a separate journal entry, since the accounts involved were already updated when the dividend was declared.

Answer 2

Answer: Please Refer to Explanation

Step-by-step explanation:

Jan 3 is just a memo entry and is not Journalized

Jan 22

DR Retained Earnings $700,000

CR Dividends Payable $700,000

( To record Dividends payable)

Feb 8

DR Dividends Payable $700,000

CR Cash $700,000

(To record Dividends Paid)

Sep 1

DR Retained Earnings $600,000

CR Common Stock Dividends Payable $400,000

CR Paid In Value of Stock Exceeding Par $200,000

( To record Dividends Payable)

Oct 1

DR Common Stock Dividends Payable $400,000

CR Common Stock $400,000

( To record issuance of Certificates)

Workings.

Jan 22

Dividends = 1.75 * 400,000

= $700,000

Sep 1

= 400,000 shares * 0.05 * 30

= $600,000

Exceeding Par

= 400,000 shares * 0.05 * (30-20)

= $200,000