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On September 1, the board of directors of Colorado Outfitters, Inc., declares a stock dividend on its 10,000, $1 par, common shares. The market price of the common stock is $30 on this date. For 1-3 Record the necessary journal entries assuming a small (10%) stock dividend, a large (100%) stock dividend, and a 2-for-1 stock split. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

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Answer:

1. assuming a small (10%) stock dividend -

Stock dividend Debit $ 30,000

Common stock Credit $ 1,000

Additional paid-in capital Credit $29,000

2. large (100%) stock dividend -

Stock dividend Debit $ 10,000

Common stock Credit $ 10,000

3. a 2-for-1 stock split -

No Journal Entry required.

Explanation:

Requirement 1

Explanation: Total paid up capital = 10,000 shares x $30 = $300,000

Common stock = 10,000 shares x $1 = $10,000

Additional paid in capital $(30 - 1) = $29

10,000 shares x $29 = $290,000

Therefore, stock dividend = $300,000 x 10% = $30,000

And for common stock = $10,000 x 10% = $1,000

Additional paid in capital = $290,000 x 10% = $29,000

Requirement 2 & 3.

2. Total paid up capital = 10,000 shares x $30 = $300,000

of them, common stock = 10,000 shares x $1 = $10,000

As there is a large stock dividend, the dividend will only from common stock par value. Therefore, the stock dividend will be = $10,000 x 100% = $10,000

3. As the stock does not provide any cash, instead only giving more stock, it will not require any journal entries. Stock may be changed, but cash dividend remains same.