Question

Self minus Defense ​Schools, Inc. is authorized to issue​ 200,000 shares of ​$2 par common stock. The company issued 73,000 shares at $ 5 per share. When the market price of common stock was $ 7 per​ share, Self minus Defense Schools declared and distributed a 14​% stock dividend.​ Later, Self minus Defense Schools declared and paid a $ 0.70 per share cash dividend.

Required:

a. Journalize the declaration and the distribution of the stock dividend.

b. Journalize the declaration and the payment of the cash dividend.

Answer 1

Answer: Please see answer in explanation column

Step-by-step explanation:

Number of outstanding shares =73,000

Stock Dividend declared % 14%

Market value per share $7

a) journal entry to record the declaration of stock dividend

Account Debit Credit

Stock dividend $71,540

Commo9n stock divo9dend redistributable $20,440

Paid in capital in excess of par

($71,540 - $20,440) $51,100

Calculations

Stock dividend = 73,000 x 14% x $7=$71,540

Common stock dividend redistributable =73,000 X 14% X $2=$20,440

b) journal entry to record the distribution of stock dividend

Account Debit Credit

Common stock dividend redistributable $20,440

Common stock $20,440

Calculation= Common stock dividend redistributable =73,000 X 14% X $2=$20,440

c) journal entry to record the declaration of cash dividend

Account Debit Credit

Cash dividend $58,254

Dividend payable - common stock $58,254

Calculations

Cash dividend= Numberof shares outstanding×Cash dividend per share

=[73, 000 shares+(73,000 shares×14%)]×$0.70 each

=[73,000 shares+ 10,220 shares]×$0.70 each

=83,220 shares×$0.70 each

= $58,254

​

d)journal entry to record the payment of cash dividend

Account Debit Credit

Dividend payable - common stock $58,254

Cash dividend $58,254