Reference no: EM132827818

Question - Flounder Corporation has outstanding 200,000 common shares that were issued at $11 per share. The balances at January 1, 2020, were $20 million in its Retained Earnings account; $4.40 million in its Contributed Surplus account; and $1.10 million in its Accumulated Other Comprehensive Income account. During 2020, Flounder's net income was $3,100,000 and comprehensive income was $3,150,000. A cash dividend of $0.50 per share was declared and paid on June 30, 2020, and a 4% stock dividend was declared at the fair value of the shares and distributed to shareholders of record at the close of business on December 31, 2020. You have been asked to give advice on how to properly account for the stock dividend. The existing company shares are traded on a national stock exchange. The shares' market price per share has been as follows

Oct. 31, 2020 $29

Nov. 30, 2020 33

Dec. 31, 2020 38

Average price over the two-month period 34

Required -

1. Create a journal entry to record the cash dividend.

2. Create a journal entry to record the stock dividend.

3. Create Flounder's shareholders' equity section (of the SFP) for the year 2020 based on the information given. Provide a schedule outlining the activity to the Retained Earnings account for the year.

4. Provide a statement of changes in shareholders' equity for 2020.