Q30E_ 2 - Horngren'S Financial And Managerial Accounting

Question

Journalizing cash and stock dividends

Self-Defense Schools, Inc. is authorized to issue 200,000 shares of \(2 par common stock. The company issued 73,000 shares at \)5 per share. When the market price of common stock was \(7 per share, Self-Defense Schools declared and distributed a 14% stock dividend. Later, Self-Defense Schools declared and paid a \)0.70 per share cash dividend.

Requirements

 

2. Journalize the declaration and the payment of the cash dividend.

Step-by-Step Solution

Answer

Retained Earnings is debited with $439,460; Common stock dividend $43,946 and paid in capital in excess of par $395,514 is credited

 

Common stock dividend is debited, and Cash is credited with $43,946

Step 1: Basic Introduction-

Cash dividend 62,780 shares (73,000-14%)

Retained Earnings(62,780 shares * $7)

Common stock dividend (62,780 shares * $0.70)

Paid in capital in excess of par[62,780 shares ($7- $0.7)]

Step 2: Journals-

Date	Transaction	Debit	Credit
	Retained Earnings	$439,460
	Common stock dividend		$43,946
	Paid in capital in excess of par		$395,514
	To record stock dividend declared
	Common stock dividend	$43,946
	Cash		$43,946
	To record dividend paid