Accounting help, How to journalize the declaration of a 15% stock dividend.?
On January 1, 2010, Gant Corporation had $1,500,000 of common stock outstanding that was issued at par and retained earnings of $750,000. The company issued 30,000 shares of common stock at par on July 1 and earned net income of $400,000 for the year. Journalize the declaration of a 15% stock dividend on December 10, 2010, for the following two independent assumptions. (a) Par value is $10 and market value is $15 (Dec 10) debit? credit? credit? (b) Par value is $5 and market value is $8. (Dec 10) debit? credit? credit? Please explain how you got your answer. (http://books.google.com/books?id=PFemtNzz0JAC&lpg=PA588&ots=A6oikYpqEY&dq=On%20January%201%2C%202010%2C%20Gant%20Corporation%20had%20%241%2C500%2C000%20of%20common%20stock%20outstanding%20that%20was%20issued%20at%20par%20and%20retained%20earnings%20of%20%24750%2C000.%20The%20company%20issued%2030%2C000%20shares%20of%20common%20stock%20at%20par%20on%20July%201%20and%20earned%20net%20income%20of%20%24400%2C000%20for%20the%20year.&pg=PA588#v=onepage&q=On%20January%201,%202010,%20Gant%20Corporation%20had%20$1,500,000%20of%20common%20stock%20outstanding%20that%20was%20issued%20at%20par%20and%20retained%20earnings%20of%20$750,000.%20The%20company%20issued%2030,000%20shares%20of%20common%20stock%20at%20par%20on%20July%201%20and%20earned%20net%20income%20of%20$400,000%20for%20the%20year.&f=false)
What is the purpose of a public company issuing stock dividends (as opposed to cash dividends)?
Part of the reason why a company might pay a stock dividend as opposed to a cash dividend is because most investors who buy dividend-paying stocks normally DRIP any cash dividends they receive right back into more shares anyway. Cash dividends are also treated as taxable income, while stock dividends are normally NOT taxed until the shares are actually sold. Because of this, stock dividends are often viewed as superior to cash dividends. However, stock dividends that have a cash option normally DO get taxed. Looking at the wording of the earnings report you linked, I cannot positively determine whether this is one of those "cash option" dividends. It does state that regular shareholders (those who own their shares directly and not through a broker) have the option to elect a different payout setup, but common shareholders must go through their brokers and request info on how to do the same. I'm also not a DRIP expert myself, as my interest is more in Futures and options than anything else. With that said, clarification from somebody else with personal experience with this company wouldn't hurt.Stock dividends do indeed result in EPS dilution and downward price adjustment, but that's something you already mentioned yourself. Personally, I think a stock dividend would make more sense if the source of the shares given to you were existing shares and not newly issued shares.
Cash dividends, stock dividends, ans stock splits?
April 30 Distributed additional shares of capital stock in a 2-for-1 stock split. Market price of stock was $35 per share. No journal entry necessary. You may make a notation that there are now 2,000,000 shares of stock outstanding and the par value is now $0.50. June 1 Declared a cash dividend of 60 cents per share. 2,000,000 x 0.60 = 1,200,000 Dr Dividends (or Retained Earnings) 1,200,000 Cr Cash Dividends Payable 1,200,000 July 1 Paid the 60-cent cash dividend to stockholders. Dr Cash Dividends Payable 1,200,000 Cr Cash 1,200,000 Aug. 1 Declared a 5 percent stock dividend. Market price of stock was $19 per share. 2,000,000 x 5% = 100,000 shares Dr Stock Dividends (Or Retained Earnings) 1,900,000 (100,000 x $19) Cr Stock Dividends Distributable 50,000 (100,000 x $0.50 par value) Cr Paid-in Capital in Excess of Par--Common Stock 1,850,000 Sept 1. Issued shares resulting from the 5 percent stock dividend declared on Aug 1. Dr Stock Dividends Distributable 50,000 Cr Common Stock 50,000 a) Prepare journal entries to record the above transaction b) compute the number of shares of capital stock outstanding year-end. 1,000,000 + 1,000,000 + 100,000 = 2,100,000 c) What is the par value per share Hitech Manufacturing stock at the end year? $0.50 per share d) Determine the effect of each of the following on total stockholders' equity: stock split, No effect declaration and payment of a cash dividend, Retained Earnings is decreased by the amount of the dividend. So total Stockholders' Equity is decreased by the same amount. declaration and distribution of a stock dividend. Paid-in Capital is increased and Retained Earnings are decreased by the same amount. So there is no effect on total Stockholders' Equity.
Entries for stock dividends???? really need help?
Number of shares outstanding before dividend 150,000/25 = 6,000 6,000 x 0.01 = 60 Number of shares in stock dividend a1. Journalize the entry to record the declaration of the dividend, capitalizing an amount equal to market value. Dr Stock Dividends 1,980 (60 x 33) Cr Stock Dividends Distributable 1,500 (60 x 25 par value) Cr Additional Paid-In Capital, Common Stock 480 (60 x 8 amount over par) a2. Journalize the entry to record the issuance of the stock certificates. Dr Stock Dividends Distributable 1,500 Cr Common Stock 1,500 b. Determine the following amounts before the stock dividend was declared: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders' equity. Total paid-in capital 198,000 (150,000 + 48,000) Total retained earnings 1,350,000 Total stockholders' equity 1,548,000 (paid in capital + retained earnings) c. Determine the following amounts after the stock dividend was declared and closing entries were recorded at the end of the year: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders' equity. Total paid-in capital 199,980 (beginning balance + new common stock issued + additional paid-in capital) Total retained earnings 1,348,020 (beginning balance - dividends) Total stockholders' equity 1,548,000 (paid in capital + retained earnings) This problem is just to show you that stock splits have no effect on total stockholders' equity. Amounts are just moved between retained earnings and paid-in capital.
Accounting help (stock dividend challenge problem)?
1,500,000 x $20 = $30,000,000 total market value of stock dividend 1,500,000 x $2 = $3,000,000 total par value of stock dividend 30,000,000 - 3,000,000 = 27,000,000 paid-in capital in excess of par At declaration Dr Retained Earnings 30,000,000 Cr Paid-In Capital in Excess of Par 27,000.000 Cr Stock Dividends Distributable 3,000,000 At distribution Dr Stock Dividends Distributable 3,000,000 Cr Common Stock 3,000,000 How are the par value per share, retained earnings, total shareholder's equity, and number of shares authorized, issued, and outstanding affected by the stock dividend?? Par Value--No Effect Retained Earnings--Decreased by the market value ($30,000,000) of the stock. Total Shareholders' Equity--No Effect. Funds are just transferred from the Retained Earnings account to paid-in capital. Number of Shares Authorized--No Effect Number of Shares Issued--increased by 1,500,000 5% = 75,000 shares Number of Shares Outstanding--increased by 1,500,000 5% = 75,000 shares