Question

Problem 15-11 a-c1 Bramble Corporation has outstanding 2,979,000 shares of common stock with a par value of $10 each. The balance in its Retained Earnings account at January 1, 2020, was $23,993,000, and it then had Paid-in Capital in Excess of Par-Common Stock of $4,983,000. During 2020, the company's net income was $4,658,000. A cash dividend of $0.60 a share was declared on May 5, 2020, and was paid June 30, 2020, and a 6% stock dividend was declared on November 30, 2020, and distributed to stockholders of record at the close of business on December 31, 2020. You have been asked to advise on the proper accounting treatment of the stock dividend. The existing stock of the company is quoted on a national stock exchange. The market price of the stock has been as follows. October 31, 2020 November 30, 2020 December 31, 2020 $32 $35 $39 (a) Prepare the journal entry to record (1) the declaration and (2) payment of the cash dividend. (b) Prepare the journal entry to record (1) the declaration and (2) distribution of the stock dividend. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) No. Date Account Titles and Explanation Debit Credit (a) (1) (a) (2) (b) (1) (b) (2)

Answer 1

(a&b) preparation of Journal entries to record the declaration and payment of cash dividend and stock dividend.

No.	Date	Account Titles and Explanation	Debit	Credit
(a) (1)	May. 5, 2020	Reatained Earnings	$1787400
		Dividends Payable		$1787400
		(To record the declaration of cash dividends)
(a) (2)	Jun. 30, 2020	Dividends Payable	$1787400
		Cash		$1787400
		(To record the payment of cash dividends)
(b) (1)	Nov. 30, 2020	Reatained Earnings	$6255900
		Common Stock Dividends Distributable		$6255900
		(To record the declaration of 6% stock dividends)
(b) (2)	Dec. 31, 2020	Common Stock Dividends Distributable	$6255900
		Common Stock		$1787400
		Paid-in Capital in Excess of Par Value		$4468500
		(To record the distribution of 6% stock dividend)

Notes:

(1) Cash dividends

= $0.60 per common share

= Number of shares outstanding × $0.60

= 2979000×0.60

= $1787400

(2) Stock Dividend

= (Number of shares outstanding × Stock dividend %) × market price as on date of declaration

= (2979000×6%) × $35

= 178740 shares × $35

= $6255900

Out of Total stock dividend,

Common stock = 178740 × $10 = $1787400

Paid in capital in excess of par = $6255900-$1787400 = $4468500

Preparation of Stockholder's Equity section:

Schedule of Additional paid in capital:

Schedule of additional paid in capital
For the year ended december 31, 2017
Beginning balance	$4983000
Paid in capital in excess of par value of common stock dividend distributed	$4468500
Ending balance	$9451500

Schedule of Retained Earnings:

Statement of retained earnings
For the year ended december 31, 2017
Beginning balance		$23993000
Add: Net income		$4658000
		$28651000
Less: Dividends
Cash dividends	$1787400
Stock dividend	$6255900
		($8043300)
Ending balance		$20607700

Stockholders Equity:

BRAMBLE CORPORATION
Stockholder's Equity
as on December 31, 2020
Common stock ($29790000+$1787400)	$31577400
Additional paid in capital	$9451500
Retained Earnings	$20607700
Total Stockholders Equity	$61636600

______×_______

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