Answer :
For the stock dividends, the fair market value per share is used to calculate the number of additional shares issued. Hence, no journal entries.
Here are the journal entries required for each transaction:
Jan. 5:
Cash (532,000 shares x $8) $4,256,000
Common stock ($5 par value x 532,000 shares) 2,660,000
Paid-in capital in excess of par 1,596,000
No entry is required for the authorization of the shares.
Jan. 16:
Retained earnings 60,000
Dividends payable 60,000
Feb. 10:
Cash (40,000 shares x $13) $520,000
Common stock ($5 par value x 40,000 shares) 200,000
Paid-in capital in excess of par 320,000
No entry is required for the authorization of the shares.
Mar. 1:
Retained earnings 1,590,000
Common stock (180,000 shares x $5 par) 900,000
Paid-in capital in excess of par 690,000
Apr. 1:
No journal entry is required for a stock split.
July 1:
Retained earnings 1,530,000
Common stock (27,000 shares x $5 par) 135,000
Paid-in capital in excess of par 1,395,000
Aug. 1:
Retained earnings 60,000
Dividends payable 60,000
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The complete question is:
The stockholders' equity section of Benton Corporation's balance sheet as of December 31, 2014 is as follows:
Stockholders' Equity
Common stock, $5 par value; authorized, 1,500,000 shares; issued, 300,000 shares $1,500,000
Paid-in capital in excess of par 840,000
Retained earnings 3,060,000
Total $5,400,000
The following events occurred during 2015:
Jan. 5 32,000 shares of authorized and not issued common stock were sold for $8 per share.
Jan. 16 Declared a cash dividend of 20 cents per share, payable February 15 to stockholders of record on February 5.
Feb. 10 40,000 shares of authorized and not issued common stock were sold for $13 per share.
March 1 A 30% stock dividend was declared and issued. Fair market value per share is currently $15.
April 1 A two-for-one split was carried out. The par value of the stock was to be reduced to $2.50 per share. Fair market value on March 31 was $18 per share.
July 1 A 15% stock dividend was declared and issued. Fair market value is currently $10 per share.
Aug. 1 A cash dividend of 20 cents per share was declared, payable September 1 to stockholders of record on August 21.
Required:
Prepare the journal entries required for each of these transactions. If any do not require a journal entry, explain why not.
