The stockholders' equity section of the balance sheet for

Dairy Top

Corporation on

September

14,

2019,

follows:

LOADING...

(Click the icon to view the data.)On

September

14,

2019,

the market price of

Dairy Top

common stock was

$18

per share.

Dairy Top

declared and distributed

a

25%

stock dividend on this date.Read the requirements

LOADING...

.

Question content area bottom

Part 1

Requirement 1. Journalize the declaration and distribution of the

25%

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

Journal Entry
Date		Accounts	Debit	Credit
September	14

Part 2

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 paid-in capital
	Total stockholders' equity

Part 3

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 $2,250,000.

transferred $2,250,000 from Retained Earnings to Common Stock and Paid-in Capital in Excess of Par.

Part 4

Requirement 4. Suppose

DT

had a cash balance of

$540,000

on

September

15,

2019.

What is the maximum amount of cash dividends the company can declare?

DT's

maximum cash dividends

are unlimited.

cannot exceed the balance in the Cash account, $540,000

cannot exceed the balance in the Common Stock account, $437,500

cannot exceed the balance in the Retained Earnings account, $5,250,000

.