Problems may be encountered in accounting for transactions involving the stockholders equity section of the balance sheet.

Question:

Problems may be encountered in accounting for transactions involving the stockholders’ equity section of the balance sheet.

Required
1. Explain the significance of the three dates that are important in accounting for cash dividends to stockholders. State the journal entry, if any, needed at each date.
2. Assume retained earnings can be used for stock dividends distributable in shares. What is the effect of an ordinary 10% on retained earnings and total stockholders’ equity?

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