Pacifica Papers Inc. needed to conserve cash, so instead of a cash dividend the board of directors

Question:

Pacifica Papers Inc. needed to conserve cash, so instead of a cash dividend the board of directors declared a 15% common share dividend on June 30, 2020, distributable on July 15, 2020. Because performance during 2020 was better than expected, the company’s board of directors declared a $0.40 per share cash dividend on November 15, 2020, payable on December 1, 2020, to shareholders of record on November 30, 2020. The equity section of Pacifica’s December 31, 2019, balance sheet showed:

Common shares, unlimited shares authorized,
650,000 shares issued and outstanding ......................................... $6,240,000
Retained earnings ................................................................................ 2,400,000

Required

1. Journalize the declaration of the share dividend. The market prices of the shares were $16.00 on June 30, 2020, and $17.60 on July 15, 2020.

2. Journalize the declaration of the cash dividend.

3. Prepare the equity section of the balance sheet at December 31, 2020, assuming profit earned during the year was $2,356,800.

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... 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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