On January 1, 2020, Frontier Corporation had $1,000,000 of common stock outstanding that was issued at par. It also had retained earnings of $750,000. The company issued 40,000 shares of common stock at par on July 1 and earned net income of $400,000 for the year. Journalize the declaration of a 15% stock dividend on December 10 2019, for the following independent assumtions. a. Par value is $10, and market price is $18. b. Par value is $5, and market price is $20.

Question

Journey Soto

Business

27 June, 15:22

On January 1, 2020, Frontier Corporation had $1,000,000 of common stock outstanding that was issued at par. It also had retained earnings of $750,000. The company issued 40,000 shares of common stock at par on July 1 and earned net income of $400,000 for the year. Journalize the declaration of a 15% stock dividend on December 10 2019, for the following independent assumtions. a. Par value is $10, and market price is $18. b. Par value is $5, and market price is $20.

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Santos Mccormick · Answer 1

Part 1. Par value is $10, and market value is $18

No. of stock outstanding = $1,000,000/10 (already issued) + 40,000 (newly shares) = 140,000 shares

15% stock dividend = 140,000 x 0.15 = 21,000 new shares

Journal Entry:

Dr Retained earnings $378,000 (21,000 x $18)

Cr Common stock $210,000 (21,000 x $10)

Cr Additional Paid-in-Capital $168,000 (21,000 x $8)

Part 2. Par value is $5, and market value is $20

No. of stock outstanding = $1,000,000/5 (already issued) + 40,000 (newly shares) = 240,000 shares

15% stock dividend = 240,000 x 0.15 = 36,000 new shares

Journal Entry:

Dr Retained earnings $720,000 (36,000 x $20)

Cr Common stock $180,000 (36,000 x $5)

Cr Additional Paid-in-Capital $540,000 (36,000 x $15)