Problem - Entries for Stock Dividends and Stock Splits
The stockholders' equity accounts of Lawrence Company have the following balances on December 31, 2010.
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Common stock, $10 par, 236,000 shares issued and outstanding
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$2,360,000
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Paid-in capital in excess of par
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1,200,000
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Retained earnings
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5,600,000
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Shares of Lawrence Company stock are currently selling on the Midwest Stock Exchange at $41.
Prepare the appropriate journal entries for each of the following. (a) and (b) and provide answer for (c).
(a) A stock dividend of 5% is declared and issued.
(b) A stock dividend of 100% is declared and issued.
(c) How much of a reduction in retained earnings results when a 2-for-1 stock split is declared and issued?