On September 15, 2016, the Scottie Company board of directors declared a 10% sto

Question

On September 15, 2016, the Scottie Company board of directors declared a 10% stock dividend on common shares. The shares are to be distributed on October 10, 2016, to shareholders of record on October 1, 2016. The market price per share on the date of declaration was $23.2 while the market price on the date of distribution was $25.2. The common stock has a par value of $5 per share and there were 1,900, 000 shares outstanding prior to the declaration of the stock dividend. Required: Prepare any necessary journal entries to record the above transactions.

Explanation / Answer

No. of common stock dividend =190,000

Value of common stock dividend =190,000*23.2( Market price on declaration of dividend )

=$ 4,408,000

1.15/09/2016 - Declaration of stock dividend

Retained earnings $ 4,408,000

To Common stock dividend Distributable $ 760,000(190,000*5)

To paid in capital in excess of par $ 3,648,000

2.10/10/2016   Common stock dividend Distributable $ 760,000

To Common stcok $ 760,000

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