Reference no: EM132611750

Before preparing financial statements for the current year, the chief accountant for Sunland Ltd. provided the following information regarding the accounting for dividends and stock splits:

1. Sunland has 22,400, $4 noncumulative preferred shares issued. It paid the preferred shareholders the quarterly dividend, and recorded it as a debit to Dividends Expense and a credit to Cash.
2. A 5% stock dividend (1,000 shares) was declared on the common shares when the fair value per share was $12. To record the declaration, Retained Earnings was debited and Dividends Payable was credited. The shares have not been issued yet.
3. The company declared a 2-for-1 stock split on its 22,400, $4 noncumulative preferred shares. The average per share amount of the preferred shares before the split was $70. The split was recorded as a debit to Retained Earnings of $1,568,000 and a credit to Preferred Shares of $1,568,000.

Question 1: Determine if each of the above transactions was recorded correctly and, if not, prepare the correct entry.