Instructions 16 Answer each question in the space provided Y

Instructions: 1-6 Answer each question in the space provided. You MUST show ALL calculations required to receive full credit. Do NOT abbreviate account titles. Points will be subtracted for failure to follow all directions. USE PENCIL! DO NOT USE PEN 1. Stock Dividends and Stock Splits Washington Corporation\'s Stockholders\' Equity as of 12/31/17 appears below: Common Stock, $10 par, 600,000 shares issued and outstanding Paid in Capital in Excess of Par -Common Stock Retained Earnings $6,000,000 3,000,000 8,000,000 Instructions: Prepare journal entries for each of the following independent cases. (a) A 15% stock dividend is declared at a time when the market value of the stock is $40 per share. (b) A 35% stock dividend is declared at a time when the market value of the stock is $40 per share. (c) A 2-for-one stock split is declared when the market value of the stock is $40 per share.

Solution

Journal entries: Accounts title and explanations Debit $ Credit $ Case-a: Retained earnings Account Dr. 3600000 (600,000*15% shares)*40     Stock dividend distributable Account 900000 (90000 shares @10)     Paid in capital in excess of par-Common 2700000 (90000 shares @30) Stock dividend distributable Account Dr. 900000      Common Stock capital 900000 Case-b Retained earnings Account Dr. 2100000 (600,000*35% shares)*10     Stock dividend distributable Account 2100000 (210000 shares @10) Stock dividend distributable Account Dr. 2100000      Common Stock capital 2100000 Note: As stock dividend is more than 20% it is large dividend therefore, issued at par value. Case-c: Memorandum entry is made in the books for the change in par value with no amount as under: Common Stock capital ($ 10) Account Dr.      Common Stock capital ($ 5) Account