Answer:
retained earnings 40,000 debit
common stock 8,000 credit
additional paid-in Common Stock 32,000 credit
Explanation:
shares issued:
800,000 shares x 5% = 4,000 new shares
face value of the shares
4,000 x $2 = 8,000
market value 4,000 x $10 = 40,000
additional paid-in 40,000 - 8,000 = 32,000
we decrease retained earnings and increase the euqity account to balance.
Answer:
Retained Earnings -- $25,000 (Debit)
Common Stock -- $25,000 (Credit)
Paid In Capital -- $210,000 (Credit)
Explanation:
Given
Authorised Shares = $800,000
Issued Shares = $250,000
Stock Selling Price = $10 per share
Outstanding Stock = $2
Stock Dividend = 5%
The journal entries are as follows:
Retained Earnings
Common Stock
Paid In Capital
The journal entries is calculated as follows:
Calculating Retained Earnings
Retained Earnings = (Outstanding Stock/Stock Selling Price) * Issued Shares
Retained Earnings = ($2/$20) * $250,000
Retained Earnings = (1/10) * $250,000
Retained Earnings = $25,000
Common Stock is also calculated the same way:
Calculating Common Stock
Common Stock = (Outstanding Stock/Stock Selling Price) * Issued Shares
Common Stock = ($2/$20) * $250,000
Common Stock = (1/10) * $250,000
Common Stock = $25,000
Lastly, Paid In Capital is calculated as follows:
Paid In Capital = Issued Shares - Stock Dividend * Authorised Shares
Paid In Capital = $250,000 - 5% * $800,000
Paid In Capital = $250,000 - $40,000
Paid In Capital = $210,000
