The stockholders equity section of the balance sheet for Yarrow Yogurt Company on August 12, 2019, follows:

Question:

The stockholders’ equity section of the balance sheet for Yarrow Yogurt Company on August 12, 2019, follows:

A1 Stockholders' Equity 2 Common stock, $0.20 par, 2,600,000 shares authorized, 500,000 shares issued 3 $ 100,000 4 Paid

On August 12, 2019, the market price of Yarrow common stock was $18 per share. Yarrow 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 Yarrow had a cash balance of $540,000 on August 13, 2019. What is the maximum amount of cash dividends the company can declare?

Balance Sheet
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