Question

Douglas McDonald Company’s balance sheet included the following shareholders’ equity accounts at December 31, 2020:

	($ in millions)
Paid-in capital:
Common stock, 1,700 million shares at $1 par	$	1,700
Paid-in capital—excess of par		17,400
Retained earnings		16,088
Total shareholders’ equity	$	35,188

On March 16, 2021, a 4% common stock dividend was declared and distributed. The market value of the common stock was $37 per share. Fractional share rights represented 3 million equivalent whole shares. Cash was paid in lieu of the fractional share rights.

Required:
1. Complete the below table to calculate the value of shares issued.
2. Prepare the appropriate entries for the declaration and distribution of the stock dividend.

Answer 1

Answer to Requirement 1. Stock Dividend Number of Outstanding Shares Stock Dividend percentage (%) Number of Shares to be issued x Market Value per Share Value of Stock Dividend Amount paid in cash for Fractional shares Value of Shares issued 1,700 4% 68 37 2,516 111 2,405 Amount paid in cash for Fractional shares = 3 Million * $37 Amount paid in cash for Fractional shares = $111 Million Answer to Requirement 2. Credit Date Mar 16, 2021 Debit 2,516 68 2,448 General Journal Retained Earnings Common Stock Distributable Paid-in Capital - Excess of Par (To record stock dividend declared) Common Stock Distributable Common Stock (To record distribution of stock dividend) 68 Mar 16, 2021 68