The stockholders equity for Heavenly Desserts Drive-Ins (HD) on December 31, 2010, follows:Stockholders’ EquityCommon stock, $0.80 par, 2,600,000 sharesauthorized, 300,000 shares issued…………………. $ 240,000Paid-in capital in excess of par common…………… 307,200Retained earnings……………………………………………. 7,122,000Other equity…………………………………………………… (200,000)Total stockholders equity……………………………. $7,469,200On May 11, 2011, the market price of HD common stock was $19 per share. Assume HD distributed a 15% stock dividend on this date.Requirements1. Journalize the 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 HD had a cash balance of $560,000 on May 12, 2011. What is the maximum amount of cash dividends HD can declare?View Solution:
The stockholders equity for Heavenly Desserts Drive Ins HD on



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