A corporation had 18,500 shares of $5 par value common stock outstanding when th

Question

A corporation had 18,500 shares of $5 par value common stock outstanding when the board of directors declared a stock dividend of 6,845 shares. At the time of the stock dividend, the market value per share was $19. The entry to record this dividend is:


1) Debit Retained Earnings $130,055; credit Common Stock Dividend Distributable $34,225; credit Paid-In Capital in Excess of Par Value, Common Stock $95,830.

2) Debit Retained Earnings $130,055; credit Common Stock Dividend Distributable $130,055.

3) Debit Common Stock Dividend Distributable $130,055; credit Retained Earnings $130,055.

4) No entry is needed.

5)Debit Retained Earnings $34,225; credit Common Stock Dividend Distributable $34,225.

Explanation / Answer

Value of stock dividend = 6845*19 = 130055 Debit Retained Earning with $130,055 Credit Common Stock Dividend Distributable with no. of share of dividend stock* par value = 6845*5 = 34,225 Credit the rest into Paid in capial in excess of par value with $95830

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