Stockholders' Equity

Common stock, $0.50 par, 2,100,000 shares

authorized, 400,000 shares issued

$200,000

Paid-in capital in excess of parcommon

861,013

Retained earnings

7,750,000

Accumulated other comprehensive income (loss)

(175,000)

On

lApril 11, 2017, the market price of Dairy Heaven common stock was $14 per share. Assume Dairy Heaven

declared and distributed a 15% stock dividend on this date.Read the requirements

Requirement 1. Journalize the declaration and distribution of the

15% stock dividend. (Record debits first, then credits. Exclude explanations from any journal entries.)

Journal Entry

Date

Accounts

Debit

Credit

April

11

Retained Earnings

Common Stock

Paid-in Capital in Excess of ParCommon

Requirement 2. Prepare the stockholders' equity section of the balance sheet after the stock dividend. (Enter the accounts in the proper order for the stockholders' equity section of the balance sheet. Use parentheses or a minus sign for numbers to be subtracted.)

Balance Sheet (Partial)
	Stockholders' Equity:
				$		par,		shares
		shares
	Total stockholders' equity

Requirement 3. Why is total stockholders' equity unchanged by the stock dividend?

The stock dividend did not change total stockholders' equity because the company gave its shareholders

a promissory note

cash

no assets

The company merely

agreed to pay later.

issued dividend checks totaling $840,000.

transferred $840,000 from Retained Earnings to Common Stock and Paid-in Capital in Excess of Par.

Requirement 4. Suppose DH had a cash balance of $590,000 on April 12, 2017. What is the maximum amount of cash dividends DH can declare? DH's maximum cash dividends

are unlimited.

cannot exceed the balance in the Cash account, $590,000

cannot exceed the balance in the Common Stock account, $230,000

cannot exceed the balance in the Retained Earnings account, $6,910,000

.

Total stockholders' equity

$8,636,013