Question

Mustang Corporation had 100,000 shares of $2 par value common stock outstanding. On December 31, 2018, the company's board of directors declares a 20 percent stock dividend. This stock dividend will be distributed on January 20, 2019 to the stockholders of record on January 15, 2019. The market price of the company's stock is $10 per share on December 31, 2018. Complete the necessary journal entry to record the declaration of the stock dividend by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Answer 1

Answer:

The following entry is made on the declaration date:    

Retained Earnings ( 20,000 x $10)  $200,000  Debit  

Common Stock Dividend Distributable  $40,000  Credit  

Paid in Capital in Excess of Par  $160,000  Credit  

At the moment of been distributed the additional shares to the stockholders the company register the following entry:    

Common Stock Dividend Distributable  $40.000  Debit  

Common Stock   $40.000  Credit  

Explanation:

When the company declares a stock dividend it does not involve cash, it means that each stockholder will get an additional percentage of shares.    

As the total value of stock it's the same, then the value per share decrease related to the price before the stock dividend because there are more shares outstanding.  

On December 31, 2018, the company's board of directors declares a 20 percent stock dividend.    

As the total shares outstanding are 100,000 , the stock dividend will be 20,000 more shares.  

The following entry is made on the declaration date:    

Retained Earnings ( 20,000 x $10)  $200.000  Debit  

Common Stock Dividend Distributable  $40.000  Credit  

Paid in Capital in Excess of Par  $160.000  Credit  

 

At the moment of been distributed the additional shares to the stockholders the company register the following entry:    

Common Stock Dividend Distributable  $40.000  Debit  

Common Stock   $40.000  Credit  

Answer 2

                                                                            Debit               Credit

Cash 100,000 x $2                                     ��     $ 200,000

Common Stock (100,000 x $ 10)                                             $ 1,000,000

Paid Up Capital Exceeds the Value Set (100,000 x $ 10)      $ 1,000,000

Further Explanation

Shares are securities or books which are a sign of ownership or equity participation in a company.

Stocks usually take the form of a piece of paper as proof. Shares can be obtained from the company concerned directly or from previous parties through the stock exchange (stock market).

Book Value of Shares

The book value of shares is the value of shares according to the company's books. The book value of the shares is obtained from the value of the remaining assets after deducting the company's liability if the shares are distributed. The book value shows the guarantee or how big the function of shares owned by investors. Some values ​​related to book values ​​include:

• Nominal value is the value determined by the company for its shares.
• Agio share is the difference in price from an investor's payment to the company minus the nominal price of the stock.
• Capital value is the total amount paid by shareholders to the company, in the form of nominal value + share capital.
• Retained earnings are profits not distributed to shareholders which are used for investment as a source of internal company funds.

Cash Flow for Shareholders:

If you buy shares, you can get cash in two ways, namely:

• The company pays dividends
• We sell shares (to other investors in the capital market or to issuers/companies that sell their shares to the public)
• Like bonds, stock prices are the present value of expected cash flows.

Learn More

Common Stock brainly.com/question/13513598

Values of Shares brainly.com/question/13024270

Detail

Class: College

Subject: Business

Keyword: Stock, Journal, Debt-Credit