(Solution) - On June 6 2012 Universal Bioenergy Inc declared a 20 -(2025 Original AI-Free Solution)

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On June 6, 2012, Universal Bioenergy, Inc. declared a 20% stock dividend. Because it is a 20% dividend, Universal Bioenergy had flexibility to account for this as a small or large stock dividend. Its common stock was trading at $ 0.01 per share at that time. Excerpts from its 10- K are provided below.

1. What journal entry did Universal Bioenergy record on June 6? What journal entry did it record on July 20? Did Universal Bioenergy account for this stock dividend as a small stock dividend or a large stock dividend? You may find ASC 505- 20- 30- 5 helpful in understanding this entity?s approach.
2. What would be the impact on the accounts if Universal Bioenergy did not use the alternative treatment permitted for closely held entities?
3. What would be the impact on the accounts if Universal Bioenergy did not use the alternative treatment permitted for closely held entities and chose a different basic treatment? That is, if Universal Bioenergy recorded it as a small stock dividend, how would the accounts change?
Discussion of the stock dividend included in ITEM 1 in the 10- K:
Approval of Stock Dividend*