Exercise 13-1 Share dividends LO1

Arcus Development Inc's equity section on the December 31, 2019 , balance sheet showed the following information:

Common shares, unlimited shares authorised, 210,000 shares issued and outstanding ........................$ 3,360,000

Retained earnings....................................575,000

On January 15, 2020, the company's board of directors declared a 15% share dividend to the share holders of record on January 20 to be distributed on January 30. The market prices of the shares on January 15, 20, and 30 were $18.90, $17.00, and $17.95 respectively.

Required:

1.Prepare the required entries for January 15, 20 and 30.

2.Prepare the equity section on the January 31, 2020, balance sheet, assuming profit earned during January 2020 was $597,500

Analysis Component: What effect did the share dividend have on the market price of Arcus's shares and why?