On October 15, 2018, a 5% stock dividend was declared and distributed. The fair

Question

On October 15, 2018, a 5% stock dividend was declared and distributed. The fair value of the common stock on this date was $32 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 10 million shares of common stock outstanding. The par of the common shares was $5. 5. Required: Prepare any necessary journal entry to record declaration and distribution of stock dividend Retome d earmn

Explanation / Answer

5,

The journal entry to record the declaration and distribution of the stock dividend will Decrease retained earnings by $16 million (10000000*5%*32) For fractional shares, retained earnings will be unaffected

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