Homework SourseThe following information applies to the questions displayed
[The following information applies to the questions displayed below.]
The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows:
On February 5, the directors declare a 16% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $41 per share on February 5 before the stock dividend. The stock’s market value is $35 per share on February 28.
1. Prepare entries to record both the dividend declaration and its distribution.
Record the declaration of 16% stock dividend.
Record the distribution of 16% stock dividend.
2. One stockholder owned 600 shares on February 5 before the dividend. Compute the book value per share and total book value of this stockholder’s shares immediately before and after the stock dividend of February 5. (Round your \"Book value per share\" answers to 3 decimal places.)
3. Compute the total market value of the investor’s shares in part 2 as of February 5 and February 28.
| Common stock—$10 par value, 150,000 shares authorized, 69,000 shares issued and outstanding | $ | 690,000 | |
| Paid-in capital in excess of par value, common stock | 525,000 | ||
| Retained earnings | 675,000 | ||
| Total stockholders’ equity | $ | 1,890,000 | |
Solution
TVX Companya has 69000 shares of common stock outstanding on Feb 5, when it declares a 16% stock dividend. This means that 11040 (69,000 shares times 16%) new shares of stock will be issued to existing stockholders.
Common Stock Dividend Distributable
Paid up Capital in Excess of Par
110400
342240
When the 11040 shares are distributed to the stockholders, the following journal entry is made:
2. Total Stockholders Equity before Stock Dividend =1890000
No. of Shares outstanding before stock dividend = 69000
Book Value per share before stock dividend = 1890000/69000 = $27.391
Total Stockholders Equity after Stock Dividend :-
Common Stock Par value
(69000+11040 = 80040 shares* $10) = 800400
Paid up Capital in Excess of Par Value
(525000+342240) = 867240
Retained Earnings (675000-452640) = 222360
Total Stakeholders Equity After Stock dividend = 1890000
No. of Shares outstanding after stock dividend = 80040
Book Value per share after stock dividend =
1890000/80040 = $23.613
3. Investor\'s Shares before stock dividend = 600
Investor\'s Shares after stock dividend = 600 + (600*16%) = 696
600* 41=
$24600
696*35=
$24360
Feel free to ask any clarification if required. Please provide feedback by thumbs up if satisfied. It will be highly appreciated. Thank you.
| Date | General Journal | Debit | Credit |
| Feb 5 | Retained Earnings (11040 shares * $41) | 452640 | |
| Common Stock Dividend Distributable Paid up Capital in Excess of Par | 110400 342240 |
![[The following information applies to the questions displayed below.] The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows:](/WebImages/26/the-following-information-applies-to-the-questions-displayed-1067695-1761558777-0.webp "[The following information applies to the questions displayed below.] The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows:")
![[The following information applies to the questions displayed below.] The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows:](/WebImages/26/the-following-information-applies-to-the-questions-displayed-1067695-1761558777-1.webp "[The following information applies to the questions displayed below.] The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows:")
