(Learning Objective 4: Recording a share dividend and reporting shareholders’

equity) The shareholders’ equity for Heavenly Desserts Drive-Ins (HD) on December 31, 20X6, is as follows:

On May 11, 20X7, the market price of HD’s ordinary shares was $19 per share. Assume HD distributed a 15% share dividend on this date.

❙ Requirements 1. Journalize the distribution of the share dividend.

2. Prepare the shareholders’ equity section of the balance sheet after the share dividend.

3. Why is the total shareholders’ equity unchanged by the share dividend?

4. Suppose HD had a cash balance of $560,000 on May 12, 20X7. What is the maximum amount of cash dividends HD can declare?