Reference no: EM133113545
Question - Pronghorn Corporation has outstanding 275,000 common shares that were issued at $8 per share. The balances at January 1, 2020, were $20 million in its Retained Earnings account; $4.10 million in its Contributed Surplus account; and $1.00 million in its Accumulated Other Comprehensive Income account. During 2020, Pronghorn's net income was $3,300,000 and comprehensive income was $3,350,000. A cash dividend of $0.80 per share was declared and paid on June 30, 2020, and a 6% 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 $30
Nov. 30, 2020 31
Dec. 31, 2020 38
Average price over the two-month period 34
Required -
1. Prepare a journal entry to record the cash dividend.
2. Prepare a journal entry to record the stock dividend.
3. Prepare Pronghorn's shareholders' equity section (of the SFP) for the year 2020 based on the information given. Prepare a schedule outlining the activity to the Retained Earnings account for the year.
4. Prepare a statement of changes in shareholders' equity for 2020.
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