Analyzing and Identifying Financial Statement Effects of Dividends Chaney Company has outstanding 40,000 shares of $10 par value common stock. It also has $405,000 of retained earnings. Near the current year-end, the company declares and pays a cash dividend of $2.50 per share and declares and issues a 7% stock dividend. The market price of the stock at the declaration date is $50 per share.

a. Using the financial statement effects template, illustrate the effects of these two separate dividends. Use negative signs with answers when appropriate. When applicable, enter total amount for contributed capital.

	Balance Sheet											Income Statement
Transaction	Cash Asset	+	Noncash Asset	=	Liabilities	+	Contrib. Capital	+	Earned Capital	-	Contra -Equity	Revenues	-	Expenses	=	Net Income
Declared and paid cash dividend	Answer	+	Answer	=	Answer	+	Answer	+	Answer	-	Answer	Answer	-	Answer	=	Answer
Declared and issued stock dividend	Answer	+	Answer	=	Answer	+	Answer	+	Answer	-	Answer	Answer	-	Answer	=	Answer

b. Prepare the journal entries for these two separate dividend transactions.

General Journal
Description		Debit	Credit
AnswerAdditional paid in capitalCashCommon stockRetained earnings		Answer	Answer
AnswerAdditional paid in capitalCashCommon stockRetained earnings		Answer	Answer
To record cash dividend
AnswerAdditional paid in capitalCashCommon stockRetained earnings		Answer	Answer
Common stock		Answer	Answer
AnswerAdditional paid in capitalCashCommon stockRetained earnings		Answer	Answer
To record stock dividend

c. Post the journal entries from b to the related T-accounts.

Cash
	Answer	Answer

Retained Earnings
	Answer	Answer
	Answer	Answer

Common Stock
	Answer	Answer

Additional Paid in Capital
	Answer	Answer