On October 15, 2016, a 6% stock dividend was declared and distributed. The marke

ID: 2480936 • Letter: O

Question

On October 15, 2016, a 6% stock dividend was declared and distributed. The market value of the common stock on this date was $31.5 per share. Fractional share rights represented 100,000 shares. Cash was paid in lieu of issuing fractional share rights. On the date of declaration and payment, the company had 11.5 million shares of common stock outstanding. The par value of the common shares was $5. Required:

1. Prepare any necessary journal entry to record declaration and distribution of stock dividend

Explanation / Answer

Prepare the Journal Entry for

General Voucher

Date

Account title and Explanation

Post.

Ref.

Debit ($)

Credit ($)

15 october , 2016

Retained Earnings(5,75,000 x $31.5)

18,112,500

Common stock((5,75,000-1,0000)x$5

2,375,000

Paid in capital-excess of par [ (4,75,000 x ($31.5 -$5) ]

12,587,500

Cash (1,00,000 x $31.5)

3,150,000

( To transfer of 5% stock dividend 5,75,000 shares and amount of $18,112,500 debited to retained earnings and credited to common stock at par value at $2,375,000 and fractional shares of 1,00,000 @ $31.5 credited to cash and balance of $12,587,500 to Paid in capital-excess of par )

Explanation: The stock dividend shares will be 5% of 115,00,000 shares is 5,75,000 shares