Roily Racing Motors is authorized to issue an unlimited number of common shares. The company issued 80,000 shares at $4 per share, and all 80,000 shares are outstanding. When the market price of common shares was $5 per share, Roily Racing Motors declared and distributed a 10% stock dividend. Later, Roily Racing Motors declared and paid a $0.50 per share cash dividend.

Requirements

1. Journalize the declaration and distribution of the stock dividend.

2. Journalize the declaration and the payment of the cash dividend.