Question

the balance sheet of patrick management consulting, inc. at december 31, 2024, reported the following stock

requirement 1. record the transactions in the general journal (record debits first, then credits. select the exp
feb 6. declared a 15% stock dividend on the common stock. the market value of stock was $28 per share

feb 15. distributed the stock dividend

transactions
feb 6 declared a 15% stock dividend on common stock. the market value of patrick management consuling, incs stock was $28 per share
feb. 15 distributed the stock dividend
jul. 29 purchased 1 600 shares of treasury stock at $28 per share
nov 27 declared a $0 70 per share cash dividend on the common stock outstanding

Explanation:

Step1: Calculate the number of shares for stock dividend

Number of shares outstanding = 28,000. Stock - dividend percentage = 15%.
Number of shares for stock dividend \(=28,000\times15\% = 4,200\) shares.

Step2: Record the declaration of stock dividend (Feb 6)

• Debit: Retained Earnings (amount = number of new shares×market value per share).

Retained Earnings \(=4,200\times28=\$117,600\)

• Credit: Common Stock - $8 Par Value (amount = number of new shares×par value per share).

Common Stock \(=4,200\times8=\$33,600\)

• Credit: Paid - In Capital in Excess of Par - Common (amount = number of new shares×(market value - par value)).

Paid - In Capital in Excess of Par - Common \(=4,200\times(28 - 8)=4,200\times20=\$84,000\)

Step3: Record the distribution of stock dividend (Feb 15)

When distributing the stock dividend, we transfer the amounts from the temporary accounts (recorded on Feb 6) to the permanent equity accounts. But since we already accounted for the changes in equity on Feb 6 (by reducing Retained Earnings and increasing Common Stock and Paid - in Capital), the journal entry for distribution is just a transfer within the equity accounts (a memorandum entry in some cases, but if we follow the double - entry system strictly):

• Debit: Stock Dividends Distributable (this account was created on Feb 6 as a liability - like account for the stock dividend, but in reality, it is an equity - related account). The amount is the sum of Common Stock and Paid - In Capital in Excess of Par from the Feb 6 entry. But if we assume we didn't use a "Stock Dividends Distributable" account (a more simplified approach for educational purposes), we can just recognize that the shares are now issued. However, if we follow the full - fledged approach:

Let's assume we had a "Stock Dividends Distributable" account on Feb 6 with a credit of \(33,600 + 84,000=\$117,600\)

• Credit: Common Stock - $8 Par Value (\$33,600) and Paid - In Capital in Excess of Par - Common (\$84,000)

Answer:

Date	Accounts and Explanation	Debit	Credit
	Common Stock - $8 Par Value		\(33,600\)
	Paid - In Capital in Excess of Par - Common		\(84,000\)
Feb 15	Stock Dividends Distributable (if used)	\(117,600\)
	Common Stock - $8 Par Value		\(33,600\)
	Paid - In Capital in Excess of Par - Common		\(84,000\)