Question

On September 1, the board of directors of Colorado Outfitters, Inc., declares a stock dividend on its 15,000, $6 par, common shares. The market price of the common stock is $35 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. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Sept 1,

DR Stock dividends $52,500

CR Common stock $9,000

CR Additional paid in capital $43,500

Sept 1,

DR Stock dividends $90,000

CR Common stock $90,000

Sept 1,

No journal entry required.

Workings

Small Dividends

Stock dividends

= 15,000 * 10% * $35

= $52,500

Common stock

= 15,000*10%* $6

= $9,000

Additional paid in capital

= 52,500 - 9000

= $43,500

Large Dividends

Stock dividends

= 15,000 * $6

= $90,000

Common stock

= 15,000 * $6

= $90,000

No entry for stock splits.