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The following information is related to ABS Company. On 1 January 2020, ABS Company had 1,000,000 shares of common stock at a par value of
The following information is related to ABS Company.
On 1 January 2020, ABS Company had 1,000,000 shares of common stock at a par value of $0.5 each. On that date, additional paid-in-capital account amounted to $600,000.
On 1 March 2020, ABS Company re-purchased 10,000 shares of common stock at a market price of $100 each by paying cash.
On 30 April 2020, ABS Company re-issued 1,000 shares of the common stock re-purchased on 1 March. The Company re-issued the common stock at $130 each.
On 30 June 2020, ABS Company purchased a building by issuing 6,000 shares of common stock at $150 each. The par value is 0.5 each.
On 31 December 2020, ABS Company announced that it would distribute stock dividend of 8,000 shares. On 31 December 2020, the market price of ABS Company common stock is $150 each. The par value is 0.5 each.
Required:
1. Prepare journal entries to record the transactions above. You are required to show the steps to determine whether the stock dividend is large or small.
2. Explain why the treatment for small stock dividend and large stock dividend is different.
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