Problem 12.2 for Self-Study
Journal entries for dividends and stock splits. The shareholders' equity section of the balance
sheet of Baker Corporation on January 1, Year 5, appears below:
Shareholders' Equity
Common Stock, $10 par value, 25,000 shares issued and outstanding
Additional Paid-in Capital
Retained Earnings
Total
$250,000
50,000
150,000
$450,000
Prepare journal entries for each of the following transactions of Baker Corporation for Year 5.
Ignore income taxes.
a. March 31: The board of directors declares a cash dividend of $0.50 per share. The firm will
pay the dividend on April 15.
b. April 15: The firm pays the dividend declared on March 31.
c. June 30: The board of directors declares and distributes a 10-percent stock dividend. The
market price per share on this date is $15.
d. December 31: The board of directors declares a 2-for-1 stock split and changes the par value
of the common shares from $10 to $5.