Question

The equity accounts of Sam Group have the following balances on December 31, 2011. Share Capital-Ordinary, $10 par, 500,000 shares issued and outstanding $5,000,000 Share Premium-Ordinary 3,500,000 Retained Earnings 8,600,000 Shares of Sam Group are currently selling at $50. Instructions Prepare the appropriate journal entries for each of the following cases. No. 1 Transaction A declaration of cash dividends for $0.2 per share Journal Entry 2 The payment of cash dividends declared above Journal Entry 3 A share dividend of 5% is declared and issued. Journal Entry 4 A share dividend of 100% is declared and issued. Journal Entry 5 A 2-for-1 share split declared and issued Journal Entry

Answer 1

No	Account title and explanation	Debit	Credit
1	Cash dividends [500,000 x $0.20]	$100,000
	Dividends payable		$100,000
	[To record declaration of cash dividends]
2	Dividends payable	$100,000
	Cash		$100,000
	[To record payment of cash dividends]
3	Share dividend [500,000 x 5% x $50 market rate]	$1,250,000
	Share capital-ordinary [500,000 x 5% x $10 par]		$250,000
	Share premium-ordinary		$1,000,000
	[To record declaration and issuance of small share dividends]
4	Share dividend	$5,000,000
	Share capital-ordinary [500,000 x 100% x $10 par]		$5,000,000
	[To record declaration and issuance of large share dividends]
5	No Entry for stock-split