Question

On September 1, the board of directors of Colorado Outfitters, Inc., declares a stock dividend on its 24,000, $15 par, common shares. The market price of the common stock is $44 on this date.

Requried:
a. Record the necessary journal entries assuming a small (10%) stock dividend
b. Record the stock dividend assuming a small (10%) stock dividend.
c. Record the stock dividend assuming a large (100%) stock dividend.
d. Record the stock dividend assuming a 2-for-1 stock split.

Answer 1

September 01

Dr Stock dividends 105,600

Cr Common stock 36,000

Cr Additional paid­in capital 69,600

September 01

Dr Stock dividends 360,000

Cr Common stock 360,000

September 01 No journal entry

Step-by-step explanation:

1. 2. & 3. Preparation to Record the journal entries assuming a small (10%) stock dividend

September 1: Stock dividends (24,000 × 10% × $44) = 105,600

September 1: Common stock (24,000 × 10% × $15) = $36,000

1. 2. & 3. Prepartion to Record the journal entries assuming a small (100%) stock dividend,

September 1: Stock dividends (24,000 shares × $15×100%) =$360,000

To Record the stock dividend assuming a 2-for-1 stock split.

No journal entry required

Hence,

Colorado Outfitters, Inc. Journal entries

September 01

Dr Stock dividends 105,600

Cr Common stock 36,000

Cr Additional paid­in capital 69,600

(105,600-36,000)

September 01

Dr Stock dividends 360,000

Cr Common stock 360,000

September 01 No journal entry