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

equity) The shareholders’ equity for Icy Pop Drive-Ins (IP) on December 31, 20X6, follows:

On August 15, 20X7, the market price of IP’s ordinary shares was €15 per share. Assume IP distributed a 20% 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 total shareholders’ equity unchanged by the share dividend?

4. Suppose IP had a cash balance of €590,000 on August 16, 20X7. What is the maximum amount of cash dividends IP can declare?