Happy Holiday, Inc

question 77

Multiple Choice

Happy Holiday, Inc. has 100,000 shares of common stock issued and outstanding, with a par value of $0.01 per share. They distributed a 15% common stock dividend; market value is $12 per share. Which of the following is the correct journal entry to record the transaction?

• A) Debit Retained earnings $180,000 and credit Paid-in capital $180,000.
• B) Debit Retained earnings $180,000, credit Common stock $150 and credit Paid-in capital $179,850.
• C) Debit Retained earnings $180,000 and credit Cash $180,000.
• D) Debit Common stock $150, debit Paid-in capital $179,850 and credit Retained earnings $180,000.

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Definitions:

Gross Profit Percentage

A financial ratio showing the proportion of money left over from revenues after accounting for the cost of goods sold.

Contract Price

The total amount agreed upon in a contract for the sale of goods, services, or property.

Involuntary Conversion

The forced exchange of an asset into a different form or property, often due to theft, casualty or condemnation, with potential tax implications.

Deferred Gain

A profit from the sale of property or an investment that has been realized but not recognized for tax purposes in the current period.