On 1 January 20X5, Dolphin Operations Ltd. reported the following in shareholders’ equity:

In 20X5, the company declared and issued a 10% stock dividend. The stock dividend was to be valued at $5 per share. The dividend resulted in a number of full shares being issued, but also there were 8,000 shares to be issued as fractional shares.

Required:
1. Prepare all journal entries for the stock dividend in 20X5. The dividend is recorded when issued. Fractional share rights are issued for fractional shares. One month after issuance, 60% of the rights are exercised and 40% lapse.
2. Repeat requirement 1, assuming cash is distributed in lieu of fractional shares.
3. Calculate the balances in the equity accounts, after the effects of the transactions in requirement 1. What do you notice about the total?

Transcribed Image Text:

Common shares, no par value; authorized, unlimited shares; issued, 2,400,000 shares $ 7,200,000 Retained earnings 24,900,000 $32,100,000