On january 1, 2017, frontier corporation had $1,125,000 of common stock outstanding that was issued at par. it also had retained earnings of $750,000. the company issued 40,500 shares of common stock at par on july 1 and earned net income of $395,000 for the year.

journalize the declaration of a 15% stock dividend on december 10, 2017, for the following independent assumptions.

(a) par value is $10, and market price is $18.
(b) par value is $5, and market price is $20.

a) See explanation

b) See explanation

Explanation:

Requirement A

Dec 31, 2017   Debit  Stock dividends                               $413,100

                       Credit    Common Stock Dividends Distributable    $229,500

                       Credit    Paid-in-capital in excess of par value         $183,600

Note: January 1, 2017 - Number of common stock outstanding = =

Number of common stock outstanding = 112,500 shares

July 1, 2017 - share issuance                   = 40,500 shares

Total number of shares                           = 153,000 shares

Total number of Stock dividend (Declared on Dec. 10) = 153,000 x 15% = 22,950 shares

Stock dividend = number of stock dividend x market price per share

Stock dividend = 22,950 shares x $18 = $413,100

Common Stock Dividends Distributable = number of stock dividend x par value = 22,950 shares x $10 = $229,500

Paid-in-capital in excess of par value = number of stock dividend x (Market price - par value) = 22,950 shares x $(18 - 10) = $183,600

Requirement B

Dec 31, 2017   Debit  Stock dividends                               $796,500

                       Credit    Common Stock Dividends Distributable     $199,125

                       Credit    Paid-in-capital in excess of par value         $597,375

Note: January 1, 2017 - Number of common stock outstanding = =

Number of common stock outstanding = 225,000 shares

July 1, 2017 - share issuance                   =   40,500 shares

Total number of shares                           = 265,500 shares

Total number of Stock dividend (Declared on Dec. 10) = 265,500 x 15% = 39,825 shares

Stock dividend = number of stock dividend x market price per share

Stock dividend = 39,825 shares x $20 = $796,500

Common Stock Dividends Distributable = number of stock dividend x par value = 39,825 shares x $5 = $199,125

Paid-in-capital in excess of par value = number of stock dividend x (Market price - par value) = 39,825 shares x $(20 - 5) = $597,375

answer(d) all of the choices are correct;