Question

1. Gloria has 600,000 shares of $1 par value common stock outstanding. The following transactions occurred during the year:

1. During April, Gloria declared a 10% stock dividend when the market price of the stock was $36 per share.
2. During May, Gloria distributed the stock dividend.
3. During June, Gloria declared a $0.50 per share cash dividend.
4. During July, Gloria paid the cash dividend.

Prepare the entries for each of these transactions.

Answer 1

Answer

--Journal entries

Transaction	Accounts title	Debit	Credit
[a]	Stock dividend (600000 shares x 10% x $ 36)	$2,160,000
	Stock dividend distributable (600000 shares x 10% x $ 1 par)		$60,000
	Paid in capital in excess of Par - Common Stock		$2,100,000
	(to record declaration)
[b]	Stock dividend distributable (600000 shares x 10% x $ 1 par)	$60,000
	Common Stock		$60,000
	(to record distribution)
[c]	Cash dividend [(600000 + 60000) shares x $ 0.50)	$330,000
	Dividend payable		$330,000
	(to record declaration)
[d]	Dividend Payable	$330,000
	Cash		$330,000
	(to record distribution)