Unformatted text preview: stock is currently selling for $40 per share,
which means that the company could distribute an additional 7,200 common shares ($288,000 ÷ $40 per
share) in a stock dividend. Since the 7,200 shares represent only 14.4% of the 50,000 shares already
outstanding, the distribution of the 7,200 shares would be considered an ordinary stock dividend.
c. Cash Dividend
Cash Dividend (–E) 25,000
25,000 Declared and paid cash dividend.
Stock Dividend (–E) 288,000
Common Stock (+SE) 72,000
Additional PaidIn Capital, Common Stock (+SE)
Declared and issued stock dividend.
d. If Cotter Company sold its marketable securities, it would receive the market value of $50 per share. Since
Cotter Company owns 2,500 shares, it would receive $125,000. Combining this $125,000 with the $25,000
of cash already on hand would allow Cotter Company to declare and pay a cash dividend of $150,000. P12–7
a. Stevenson Enterprises would make the following journal entry for the stock...
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