Douglas McDonald Companys balance sheet included the following shareholders equity accounts at December 31, 2020: ($ in

Question:

Douglas McDonald Company’s balance sheet included the following shareholders’ equity accounts at December 31, 2020:

($ in millions)

Paid-in capital:

Common stock, 900 million shares at $1 par..................................$ 900

Paid-in capital—excess of par.............................................................15,800

Retained earnings....................................................................................14,888

Total shareholders’ equity..................................................................$31,588

On March 16, 2021, a 4% common stock dividend was declared and distributed. The market value of the common stock was $21 per share. Fractional share rights represented 2 million equivalent whole shares. Cash was paid in lieu of the fractional share rights.

Required:

1. What is a fractional share right?

2. Prepare the appropriate entries for the declaration and distribution of the stock dividend.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

Fantastic news! We've Found the answer you've been seeking!