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Entries for Stock Dividends and Stock Splits: Lawrence Company

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The stockholder's equity accounts of Lawrence Company have the following balance on December 31, 2010. Common stock, $10 par, 274,000 shares issued and outstanding $2,740,000, Paid-in capital in excess of par $1,200,000, Retained Earnings $5,600,000. Shares of Lawrence Company stock are currently selling on the Midwest Stock Exchange at $42. Journal entries for (a) A stock dividend of 5% is declared and issued. (b) A stock dividend of 100% is declared and issued. (c) How much of a reduction in retained earning results when a 3-for-1 stock split is declared and issued.

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Solution Summary

Provides steps necessary to prepare stock dividends and stock splits.

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a.
Stock dividend that is less than 20-25% is recorded based on the fair value.
Journal Entry:
Retained Earning 575,400
...

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