Question

i need help ?

The stockholders' equity section of Jun Company's balance sheet as of April 1 follows. On April 2, Jun declares and distributes a 20% stock dividend. The stock's per share market value on April 2 is $10 (prior to the dividend). Common stock-$5 par value, 555,000 shares authorized, 290,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $ 1,450,000 670,000 923,000 $ 3,043,000 Prepare the stockholders' equity section immediately after the stock dividend. JUN COMPANY Stockholders' Equity April 2 (after stock dividend) Total paid-in capital Total stockholders' equity

Answer 1

Jun Company Stockholders' Equity April 2
Common Stock: $ 5 par value, 348,000 shares issued and outstanding	$1,740,000
Paid-in Capital in Excess of Par Value: Common Stock	960,000
Total Paid-in Capital	2,700,000
Retained Earnings	343,000
Total Stockholders' Equity	$3,043,000

As the stock dividend does not exceed 25%, it is considered to be a small dividend, and as such, is capitalized at market price. The number of shares to be issued = 290,000 x 20% = 58,000.

Therefore, retained earnings to be reduced by 58,000 x $ 10 = $ 580,000.

In the books of Tamas Company:

Transaction	General Journal	Debit	Credit
		$	$
1.	Cash	699,600
	Preferred Stock		660,000
	Paid-in Capital in Excess of Par Value: Preferred Stock		39,600

	Par Value of Preferred Shares	Dividend Rate	Dividend per Preferred Share	Number of Preferred Shares	Preferred Dividend for 2 years
Calculation of Preferred Dividend	$ 5	7 %	$ 0.35	75,000	$ 52,500
Total Cash Dividend	$ 100,000
To Preferred Shareholders	52,500
To Common Shareholders	$ 47,500