Question

Douglas McDonald Company’s balance sheet included the following shareholders’ equity accounts at December 31, 2017:
($ in millions)
Paid-in capital:
Common stock, 1,550 million shares at $1 par $ 1,550
Paid-in capital—excess of par 17,100
Retained earnings 15,863
Total shareholders’ equity $ 34,513
On March 16, 2018, a 4% common stock dividend was declared and distributed. The market value of the common stock was $34 per share. Fractional share rights represented 3 million equivalent whole shares. Cash was paid in lieu of the fractional share rights.
Required:
1. Complete the below table to calculate the value of shares issued.
2. Prepare the appropriate entries for the declaration and distribution of the stock dividend.

Answer 1

Answer:

1.  Stock Dividend

Number of outstanding shares A                   $1,550  

Stock dividend percentage B                         4%

Numbers of shares to be issued C=A*B        $62

Market value per share D                               $34

Value of Stock dividend E=C*D                      $2,108

Amount paid in cash for fractional shares F  $102

Value of shares issued E-F                              $2,006

2.  General Journal                 Debit     Credit

    Retained Earnings          $2,108  

           Common Stock                           $59

           Paid-in Capital - excess in par   $1,947

           Cash                                            $102

    (To record distribution of the stock dividend)