Mustang Corporation had 100,000 shares of $2 par value common stock outstanding. On December 31, 2021, the company's board of directors declares a 50 percent stock dividend. This stock dividend will be distributed on January 20, 2022 to the stockholders of record on January 15, 2022. The market price of the company's stock is $10 per share on December 31, 2021. Complete the necessary journal entry to record the declaration of the stock dividend by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.Cash dividends involve three events. On the date of declaration, the directors bind the company to pay the dividend. A dividend declaration reduces retained earnings and creates a current liability. On the date of record, recipients of the dividend are identified. On the date of payment, cash is paid to stockholders and the current liability is removed. Neither a stock dividend nor a stock split alters company value. However, the value of each share is less due to the distribution of additional shares. The distribution of additional shares is according to individual stockholders' ownership percentage. Small stock dividends (<= 25%) are recorded by capitalizing retained earnings equal to the market value of distributed shares. Large stock dividends (> 25%) are recorded by capitalizing retained earnings equal to the par or stated value of distributed shares. Stock splits do not require journal entries but do require changes in the description of stock.
Mustang Corporation had 100,000 shares of $2 par value common stock outstanding. On December 31, 2021, the company's board of directors declares a 50 percent stock dividend. This stock dividend will be distributed on January 20, 2022 to the stockholders of record on January 15, 2022. The market price of the company's stock is $10 per share on December 31, 2021. Complete the necessary journal entry to record the declaration of the stock dividend by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.Cash dividends involve three events. On the date of declaration, the directors bind the company to pay the dividend. A dividend declaration reduces retained earnings and creates a current liability. On the date of record, recipients of the dividend are identified. On the date of payment, cash is paid to stockholders and the current liability is removed. Neither a stock dividend nor a stock split alters company value. However, the value of each share is less due to the distribution of additional shares. The distribution of additional shares is according to individual stockholders' ownership percentage. Small stock dividends (<= 25%) are recorded by capitalizing retained earnings equal to the market value of distributed shares. Large stock dividends (> 25%) are recorded by capitalizing retained earnings equal to the par or stated value of distributed shares. Stock splits do not require journal entries but do require changes in the description of stock.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter16: Retained Earnings And Earnings Per Share
Section: Chapter Questions
Problem 23P
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Transcribed Image Text:Mustang Corporation had 100,000 shares of $2 par value common stock outstanding. On December 31, 2021, the
company's board of directors declares a 50 percent stock dividend. This stock dividend will be distributed on January
20, 2022 to the stockholders of record on January 15, 2022. The market price of the company's stock is $10 per share
on December 31, 2021.
Complete the necessary journal entry to record the declaration of the stock dividend by selecting the account names
from the drop-down menus and entering the dollar amounts in the debit or credit columns.Cash dividends involve three
events. On the date of declaration, the directors bind the company to pay the dividend. A dividend declaration reduces
retained earnings and creates a current liability. On the date of record, recipients of the dividend are identified. On the
date of payment, cash is paid to stockholders and the current liability is removed. Neither a stock dividend nor a stock
split alters company value. However, the value of each share is less due to the distribution of additional shares. The
distribution of additional shares is according to individual stockholders' ownership percentage. Small stock dividends
(<= 25%) are recorded by capitalizing retained earnings equal to the market value of distributed shares. Large stock
dividends (> 25%) are recorded by capitalizing retained earnings equal to the par or stated value of distributed shares.
Stock splits do not require journal entries but do require changes in the description of stock.
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