Question

Supreme Water Sports has 12,000 shares of $3 par value common stock outstanding. Supreme distributes a 15% stock dividend when the market value of its stock is $18 per share Read the requiremegts. Requirement 1. Journalize Supreme's declaration of the stock dividend on September 15 and distribution on September 30. (Record debits first, then credits. Select the explanation on the last line of the journal entry table) Start by journalizing the declaration of 1 0 Requirements Date Sep. 15 1. Journalize Supreme's declaration of the stock dividend on September 15 ano distribution on September 30. 2. What is the overall effect of the stock dividend on Supreme's total assets? 3. What is the overall effect on total stockholders' equity? Now journalize the distribution of the Print Done Date Choose from any list or enter any number in the input fields and then continue to the next stinn

Answer 1

Solution:

Requirement 1:

Date	Accounts and Explanation	Debit	Credit
Sept. 15	Retained Earnings (12000*15%)*18	$          32,400
	Common Stock Dividend Distributable (12000*15%)*3		$             5,400
	Paid-In-Capital Excess of Par (12000*15%)*15		$           27,000
	( To record declaration of stock dividend)
Sept. 31	Common Stock Dividend Distributable (12000*15%)*3	$            5,400
	Common Stock		$             5,400
	( To record distribution of common stock)

Requirement 2:

The stock dividends have No Effect on total assets.

Note:

1) There will be no effect, because no where in journal entry it is effecting any asset.

Requirement 3:

The stock dividends have No Effect on total stockholders` equity.

Note:

1) There will be no effect, because whatever amount is used for stock dividend has taken from retained earnings and transferred to common stock and paid in capital in excess of par. Here retained earnings, common stock and paid in capital in excess of par are part of total stockholders` equity.