Douglas McDonald Company's balance sheet included the following shareholders' equity accounts at December 31, 2010: On March

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Douglas McDonald Company's balance sheet included the following shareholders' equity accounts at December 31, 2010:

On March 16, 2011, a 4% common stock dividend was declared and distributed. The market value of the common stock was $21 per share. Fractional share rights represented 2 million equivalent whole shares. Cash was paid in lieu of the fractional share rights.


Required:

1. What is a fractional share right?

2. Prepare the appropriate entries for the declaration and distribution of the stock dividend.


Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Intermediate Accounting

ISBN: 978-0077400163

6th edition

Authors: J. David Spiceland, James Sepe, Mark Nelson

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