Accounting for cash and stock dividends (Learning Objectives 4 & 5)

10–15 min.

Inland Machine Tool, Inc., is authorized to issue 700,000 shares of $5 par common stock. The company issued 71,000 shares at $5 per share, and all 71,000 shares are outstanding. When the market price of common stock was $9 per share, Inland Machine Tool, Inc., declared and distributed a 15% stock dividend. Later, Inland Machine Tool, Inc., declared and paid a $0.40 per share cash dividend.

Requirements 1. Journalize the declaration and distribution of the stock dividend.

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

AppendixLO1