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    Record stock dividends, splits, diluted EPS (convertible preferred or bonds)

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    How do you record stock dividends? What about stock splits - how do you record them?

    Suppose we have dilutive securities, how do we handle them when computing diluted earnings per share?

    Suppose we have convertible preferred stock? How would we compute diluted earnings per share?

    Suppose we have convertible bonds? How would we compute diluted earnings per share?

    From the corporation's perspective, why might the issuance of long term debt (e.g., bonds payable) be a better choice for both the company and its investors than stock?

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    ANSWERS

    How do you record stock dividends?
    Small stock dividends - less than 20-25%
    DR: Retained earnings - at market value of shares
    CR: Common stock
    DR: Paid in capital

    Large stock dividends - more than 20-25%
    DR: Retained earnings - at par value
    CR: Common stock

    What about stock splits - how do you record them?
    There is no journal entry for stock splits. Only a memorandum entry noting ...

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