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29 July, 05:20

On September 1, the board of directors of Colorado Outfitters, Inc., declares a stock dividend on its 16,000, $7 par, common shares. The market price of the common stock is $36 on this date.

Record the necessary journal entries assuming a small (10%) stock dividend, a large (100%) stock dividend, and a 2-for-1 stock split. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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  1. 29 July, 05:29
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    See the answers and explanation below.

    Explanation:

    a. the necessary journal entries assuming a small (10%) stock dividend

    Date Details Dr ($) Cr ($)

    Sept. 1 Stock Dividends (16,000 * 36 * 10%) 57,600

    Common Stock (16,000 * 7 * 10%) 11,200

    Additional Paid-in Capital - Common Stock 46.400

    To record a small (10%) stock dividend on common stock ...

    b. the necessary journal entries assuming a large (100%) stock dividend

    Date Details Dr ($) Cr ($)

    Sept. 1 Stock Dividends (16,000 * 7 * 100%) 112,000

    Common Stock (16,000 * 7 * 10%) 112,000

    To record a large (100%) stock dividend on common stock ...

    c. the necessary journal entries assuming a 2-for-1 stock split.

    "No journal entry required"

    Note: Although no journal entry is required here but the number of common stock will increase to 32,000 (i. e. 16,000 * 2 = 32.00).
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