Stock Dividend
Response to the following problem:
The stockholders' equity of the Sadler Company is as shown:
Common stock, $10 par $250,000
Additional paid-in capital on common stock 150,000
Retained earnings 200,000
$600,000
The company is considering the declaration and issuance of a stock dividend at a time when the market price is $30 per share.
Required
1. Assuming the board of directors recommends a 6% stock dividend, prepare:
a. the journal entry at the date of declaration
b. the journal entry at the date of issuance
c. the stockholders' equity after the issuance
2. Assuming, instead, that a 40% stock dividend is recommended, repeat (a), (b), and (c) of Requirement 1.