Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

P15.11 (LO 3, 4) (Stock and Cash Dividends) Earnhart Corporation has outstanding 3,000,000 shares of common stock with a par value of $10 each. The

image text in transcribed
image text in transcribed
P15.11 (LO 3, 4) (Stock and Cash Dividends) Earnhart Corporation has outstanding 3,000,000 shares of common stock with a par value of $10 each. The balance in its Retained Earnings account at January 1, 2020, was $24,000,000, and it then had Paid-in Capital in Excess of Par-Common Stock of $5,000,000. During 2020, the company's net income was $4,700,000. A cash dividend of $0.60 a share was declared on May 5,2020, and was paid June 30,2020, and a 6\% stock dividend was declared on November 30,2020 , and distributed to stockholders of record at the close of business on December 31 , 2020. You have been asked to advise on the proper accounting treatment of the stock dividend. The existing stock of the company is quoted on a national stock exchange. The market price of the stock has been as follows. Instructions a. Prepare the journal entry to record the declaration and payment of the cash dividend. b. Prepare the journal entry to record the declaration and distribution of the stock dividend. c. Prepare the stockholders' equity section (including schedules of retained earnings and additional paid-in capital) of the balance sheet of Earnhart Corporation for the year 2020 on the basis of the foregoing information. Draft a note to the financial statements setting forth the basis of the accounting for the stock dividend, and add separately appropriate comments or explanations regarding the basis chosen

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting A Managerial Emphasis

Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav

13th Edition

8120335643, 136126634, 978-0136126638

More Books

Students also viewed these Accounting questions

Question

LO5.2 Discuss government failure and explain why it happens.

Answered: 1 week ago