Happy Co.

has total equity as

mention below :
In 2017, Happy has $50,000
market cap with $5 par value
and 6,000 shares outstanding.
There are several transaction that
Happy Co. did in 2017, that
related to equity, such as :
1. Happy declares and pays $0.5
per share cash dividend
2. Happy declares and issues a
10% share dividend when the
market price is $15 per share
3. Happy declares and issues a
50% share dividend when the
market price is $20 per share
4. Happy declares a 2-for-1 share
split and issues new shares.
 Requires :
For each transaction above,
(a) Make the journal entries for
each transactions
(b) Indicate the impact of each
transactions to the total assets,
share capital-ordinary, share
premium-ordinary, retained
earning, and also total equity.
(additional information : the
increase or decrease, and how
much that will affect)
Answer :
Share capital – ordinary $30,000
Shares 6,000
Par value $5

1. $0.5 per share cash dividend

Retained earning 3,000
Cash dividend 3,000
( 6,000 x $0.5)

impact :
TA – decrease as $3,000
SC-O – no effect
SP-O – no effect
R/E – decrease as $3,000
TE – decrease as $3,000
2. 10% share dividend when MP is $15 per
share
6,000 x 10% = 600
Retained Earning
(600 x $15 = 9,000) 9,000
Share capital-ordinary 3,000
Share premium-ordinary 6,000

impact :
TA – no effect
SC-O – increase as 3,000
SP-O – increase as 6,000
R/E – decrease as 9,000
TE – no effect
3. 50% share dividend when MP is $20 per
share
6,000 x 20% = 1,200
Retained Earning
(1,200 x $20 = 24,000) 24,000
Share capital-ordinary 6,000
Share premium-ordinary 18,000

impact :
TA – no effect
SC-O – increase as 6,000
SP-O – increase as 18,000
R/E – decrease as 24,000
TE – no effect
4. When share-split,

No Entry

TA – No effect
SC-O – No effect
SP-O – No effect
R/E – No Effect
TE – No Effect