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Unformatted text preview: shares are held as treasury stock. Thus, only 47,000 shares are
eligible to receive a dividend. b. Date of declaration
Cash Dividend (–SE) 705,000
Dividend Payable (+L)
705,000 Declared divided.
Date of record
No journal entry is necessary.
Date of payment
Dividend Payable (–L) 705,000
Cash (–A) 705,000
c. Stock Dividend (–SE) Capital, Common Stock (+SE)
Declared and issued stock dividend. 235,000a
Common Stock (+SE)
188,000 a $235,000 is calculated as follows: 1. = Number of Shares Outstanding 10%
= 47,000 10% = 4,700 Shares
2. Value of Dividend
= $50 Fair Market per Share 4,700 Shares to Be Distributed
b $47,000 = 4,700 shares to be distributed par value of $10 per share
d. Number of Shares to Be Distributed The overall impact of cash dividends is a decline in the Retained Earnings account. Since retained
earnings is a part of equity, the debt/equity ratio will increase. Issuance of stock dividends results in no
change in the overall stockholders’ equi...
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