The shareholders equity for Best in Show Cinemas L.td. (BSC) (adapted) at December 31. 2019 , appears as follows:

On April 15, 2020, the market price of BSC common shares was \(\$ 17\) per share. Assume BSC declared a \(10 \%\) stock dividend on this date and distributed the stock dividend on April 30.
{Requirements}
1. Journalize the declaration and distribution of the stock dividend.
2. Prepare the shareholders' equity section of the balance sheet after the stock dividend.
3. Why is total shareholders' equity unchanged by the stock dividend?
4. Suppose BSC had a cash balance of \(\$ 540,000\) on April 16,2020 . What is the maximum amount of cash dividends BSC can declare?

Transcribed Image Text:

Shareholders' Equity Common shares, 2,000,000 shares authorized, 500,000 shares issued Retained earnings...... $8.012.000 7.122.000 Total shareholders' equity. $8,134,000