Prepare the appropriate entries for the declaration

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Question - Douglas McDonald Company's balance sheet included the following shareholders' equity accounts at December 31, 2015:

Paid in capital:

Common stock, 900 million shares at $1 par = $900

Paid-in capital - excess of par = $15,800

Retained earnings = 14,888

Total shareholders' equity = $31,588

On March 16, 2016, a 4% common stock dividend was declared and distributed. The market value of the common stock was $21 per share. Fractional share rights represented 2 million equivalent whole shares. Cash was paid in lieu of the fractional share rights.

Required:

1. What is a fractional share right?

2. Prepare the appropriate entries for the declaration and distribution of the stock dividend.

Reference no: EM132060852

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