Question

On January 1, 2017, Frontier Corporation had $1,245,000 of common stock outstanding that was issued at par. It also had retained earnings of $745,000. The company issued 37,000 shares of common stock at par on July 1 and earned net income of $410,000 for the year. Journalize the declaration of a 15% stock dividend on December 10, 2017, for the following independent assumptions.

(a) Par value is $10, and market price is $19.

(b) Par value is $5, and market price is $21.

Answer 1

Working Notes: a.) Shares Outstanding = $1,245,000/$10 + 37,000 Shares in July = 124,500 + 37,000 = 161,500 Stock Dividend = 161,500*15% = 24,225 Stock Dividend value(Market value) = 24,225*$19 Market value = $460,275 Stock Dividend value(per value) = 24,225*$10 par value = $42,250 (b) shares Outstanding = $1,245,000/$5 + 37,000 Shares in July = 249,000 + 37,000 = 286,000 Stock Dividend = 286,000*15% = 42,900 Stock Dividend value(Market value) = 42,900*$21 Market value = $900,900 Stock Dividend value(per value) = 42,900*$5 par value = $214,500