Brief Exercise 14-2 Langley Corporation has 47,900 shares of $12 par value commo

Question

Brief Exercise 14-2 Langley Corporation has 47,900 shares of $12 par value common stock outstanding. It declares a 10% stock dividend on December 1 when the market value per share is $18. The dividend shares are issued on December 31 Prepare the entries for the declaration and payment of the stock dividend. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. Date Account Titles and Explanation Debit Credit

Explanation / Answer

1. Entry to record declaration of 10% stock dividend on december for 47,900 shares of $12 par value when the market price is $18.

We debit the retained earnings with $86,220 ( 4,790 x $18 ) and credit the stock dividend distributable.

10% of 47,900 shares = 4,790 shares. They need to be priced at the amrket value on the date of declaration i.e.,$18.

To record the issue of stock dividend on Dec.31, we debit stok dividend distributable and credit common stock with par value i.e., $57,480 (4,790 x $12) and Additional paid in capital with $28,740 (4,790 x $6).

Date Account Title Debit Credit Dec.1 Retained earnings 86,220 Stock dividend distributable 86,220

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