Company Z has 8 million shares of common stock authorized with a par value of $1 and a market price of $72. There are 4 million outstanding shares and 1 million shares held in treasury stock.Required:Part a. Prepare the journal entry if the company declares and distributes a 10% stock dividend.Part b. Show the effect of the 10% stock dividend on assets, liabilities, and stockholders' equity.Part c. Prepare the journal entry if the company declares and distributes a 100% stock dividend.Part d. Show the effect of the 100% stock dividend on assets, liabilities, and stockholders' equity.
What will be an ideal response?
Part a
Declaration and distribution of a 10% stock dividend
| Retained Earnings ($72 Market value per share × | 28,800,000 |
| Common Stock ($1 × 4,000,000 Outstanding shares | 400,000 |
| Additional Paid-in Capital | 28,400,000 |
Part b
| Assets = Liabilities + | Stockholders' Equity |
| Retained Earnings | -28,800,000 |
| Additional Paid-in Capital | +28,400,000 |
| Common Stock | +400,000 |
Part c
Declaration and distribution of a 100% stock dividend
| Retained Earnings ($1 Par value per share × 4,000,000 | 4,000,000 |
| Common Stock | 4,000,000 |
Part b
| Assets = Liabilities + | Stockholders' Equity |
| Retained Earnings | -4,000,000 |
| Common Stock | +4,000,000 |
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