The stockholders’ equity section of the balance sheet for Warren Corporation on August 16, 2022, follows: 

On August 16, 2022, the market price of Warren common stock was $20 per share. Warren declared and distributed a 10% stock dividend on this date. 

Requirements 

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

2. Prepare the stockholders’ equity section of the balance sheet after the stock dividend.

3. Why is total stockholders’ equity unchanged by the stock dividend?

4. Suppose Warren had a cash balance of $530,000 on August 17, 2022. What is the maximum amount of cash dividends the company can declare?

Transcribed Image Text:

1 2 3 A1 Stockholders' Equity Common stock, $0.50 par, 2,700,000 shares authorized, 300,000 shares issued 4 Paid-in capital in excess of par-common 5 Retained earnings 6 Accumulated other comprehensive income (loss) Total stockholders' equity 7 8 B $ 150,000 645,760 7,750,000 (185,000) $8,360,760