Answer:
a) See explanation
b) See explanation
Explanation:
Requirement A
Dec 31, 2017 Debit Stock dividends $413,100
Credit Common Stock Dividends Distributable $229,500
Credit Paid-in-capital in excess of par value $183,600
Note: January 1, 2017 - Number of common stock outstanding = [tex]\frac{Common Stock}{Common stock par value}[/tex] = [tex]\frac{1,125,000}{10}[/tex]
Number of common stock outstanding = 112,500 shares
July 1, 2017 - share issuance = 40,500 shares
Total number of shares = 153,000 shares
Total number of Stock dividend (Declared on Dec. 10) = 153,000 x 15% = 22,950 shares
Stock dividend = number of stock dividend x market price per share
Stock dividend = 22,950 shares x $18 = $413,100
Common Stock Dividends Distributable = number of stock dividend x par value = 22,950 shares x $10 = $229,500
Paid-in-capital in excess of par value = number of stock dividend x (Market price - par value) = 22,950 shares x $(18 - 10) = $183,600
Requirement B
Dec 31, 2017 Debit Stock dividends $796,500
Credit Common Stock Dividends Distributable $199,125
Credit Paid-in-capital in excess of par value $597,375
Note: January 1, 2017 - Number of common stock outstanding = [tex]\frac{Common Stock}{Common stock par value}[/tex] = [tex]\frac{1,125,000}{5}[/tex]
Number of common stock outstanding = 225,000 shares
July 1, 2017 - share issuance = 40,500 shares
Total number of shares = 265,500 shares
Total number of Stock dividend (Declared on Dec. 10) = 265,500 x 15% = 39,825 shares
Stock dividend = number of stock dividend x market price per share
Stock dividend = 39,825 shares x $20 = $796,500
Common Stock Dividends Distributable = number of stock dividend x par value = 39,825 shares x $5 = $199,125
Paid-in-capital in excess of par value = number of stock dividend x (Market price - par value) = 39,825 shares x $(20 - 5) = $597,375
