Reference no: EM132889657
Problem - Various Dividends Stamboul Company lists the following condensed balance sheet as of the beginning of 2019:
Current assets $60,000
Investment in Ostend bonds 9,000
Fixed assets (net) 200,000
$269,000
Current liabilities $ 30,000
Common stock, no par 150,000
Retained earnings 89,000
$269,000
Stamboul is considering the impact of various types of dividends on this balance sheet. Each dividend would be declared and paid in 2019. These include:
Cash dividend of $1.00 per share on the 15,000 shares outstanding.
Stock dividend of 5% on the 15,000 shares outstanding when the market price is $17 per share.
Property dividend consisting of the $9,000 (book value) investment in Ostend bonds being held to maturity. This investment has a current market value of $13,000. (For Requirement 2, assume any gain or loss is to be reflected in retained earnings. Disregard income taxes.)
Scrip dividend of $0.80 per share on the 15,000 shares outstanding. The scrip earns interest at a 12% annual rate and is to be declared on January 30 and paid on December 30, 2019. (For Requirement 2, assume any interest expense is to be reflected in retained earnings. Disregard income taxes.)
Cash dividend consisting of a $0.70 per share normal dividend and a $0.30 per share liquidating dividend.
Required - For each preceding independent dividend:
Prepare the appropriate journal entries for the declaration and payment or distribution of the dividend.
Prepare a condensed balance sheet after each dividend has been paid or distributed.