PI5.11 (LO 3, 4) (Stock and Cash Dividends) Earnhart Corporation has outstanding 3,000,000 shares of common stock with a par value of $10 each. The balance in its Retained Earnings account at January 1, 2020, was $24,000,000, and it then had Paid-in Capital in Excess of Par-Common Stock of $5,000,000. During 2020, the company's net income was $4,700,000. A cash dividend of 50.60 a share was declared on May 5, 2020, and was paid June 30, 2020, and a 6% stock dividend was declared on November 30, 2020, and distributed to stockholders of record at the close of business on December 31, 2020. You have been asked to advise on the proper accounting treatment of the stock dividend. The existing stock of the company is quoted on a national stock exchange. The market price of the stock has been as follows. October 31, 2020 November 30, 2020 December 31, 2020 $31 $34 $38 Instructions a. Prepare the journal entry to record the declaration and payment of the cash dividend b. Prepare the journal entry to record the declaration and distribution of the stock dividend c. Prepare the stockholders' equity section (including schedules of retained earnings and additional paid-in capital) of the balance sheet of Earnhart Corporation for the year 2020 on the basis of the foregoing information. Draft a note to the financial statements setting forth the basis of the account- ing for the stock dividend, and add separately appropriate comments or explanations regarding the t basis chosen. Problems 15-47
PI5.11 (LO 3, 4) (Stock and Cash Dividends) Earnhart Corporation has outstanding 3,000,000 shares of common stock with a par value of $10 each. The balance in its Retained Earnings account at January 1, 2020, was $24,000,000, and it then had Paid-in Capital in Excess of Par-Common Stock of $5,000,000. During 2020, the company's net income was $4,700,000. A cash dividend of 50.60 a share was declared on May 5, 2020, and was paid June 30, 2020, and a 6% stock dividend was declared on November 30, 2020, and distributed to stockholders of record at the close of business on December 31, 2020. You have been asked to advise on the proper accounting treatment of the stock dividend. The existing stock of the company is quoted on a national stock exchange. The market price of the stock has been as follows. October 31, 2020 November 30, 2020 December 31, 2020 $31 $34 $38 Instructions a. Prepare the journal entry to record the declaration and payment of the cash dividend b. Prepare the journal entry to record the declaration and distribution of the stock dividend c. Prepare the stockholders' equity section (including schedules of retained earnings and additional paid-in capital) of the balance sheet of Earnhart Corporation for the year 2020 on the basis of the foregoing information. Draft a note to the financial statements setting forth the basis of the account- ing for the stock dividend, and add separately appropriate comments or explanations regarding the t basis chosen. Problems 15-47
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
dont give answer in image format
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education