Detailed Answer
(c) The only time a journal entry is recorded for the
issuance and exercise of stock rights is on the date of exercise. At
the date of issuance, only a memorandum entry is recorded. The
redemption of the rights issued to the shareholders should be
treated like a dividend. Accordingly, retained earnings will be
decreased by the amount paid to the shareholders (120,000 ×
$0.10 = $12,000).