Question

Problem 15-11 Stellar Corporation has outstanding 3,002,000 shares with common stock of a par value of $10 each. The balance in its Retained Earnings account at January 1, 2017, was $24,126,000, and it then had Paid-in Capital in Excess of Par-Common Stock of $4,995,000. During 2017, the company's net income was $4,715,000 A cash dividend of $0.60 a share was declared on May 5, 2017, and was paid June 30, 2017, and a 6% stock dividend was declared on November 30, 2017, and distributed to stockholders of record at the close of business on December 31, 2017. 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, 2017 November 30, 2017 December 31, 2017 536 $40 Your answer is correct. (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 0 for the amounts.) No. Date Account Titles and Explanation Debit Credit (a) (1) May 5 Retained Earnings 1,801,200 Dividends Payable 1,801,200 (a) (2) June 30 s Payable 1,801,200 Cash 1,801,200 (b) (1) Nov. 30 Retained Earnings 6,484,320 Common Stock Dividend Distributable 1,801,200 Paid-in Capital in Excess of Par - Common Stoclk 4,683,120

Answer 1

Balance sheet (partial)
as of december 31, 2017
Common stock- $10 par value, (24126000+1801200)	$2,59,27,200.00
additional paid in capital	$96,78,120.00
Retained earnings	$2,05,55,480.00
Total stockholder's equity	$5,61,60,800.00

Statement of retained earnings
For the year ended december 31, 2017
Beginning balance	$2,41,26,000.00
Add: net income	$47,15,000.00
Less:dividend on common stock (1801200+6484320)	$82,85,520.00
Ending balance	$2,05,55,480.00

Schedule of additional paid in capital
For the year ended december 31, 2017
Beginning balance.	$49,95,000.00
Excess of fair value over par value of common stockdistributed as a dividend	$46,83,120.00
Ending balance	$96,78,120.00