Question

global corporation had 55,000 shares of $20 par value common stock outstanding on july 1. later that day the board of directors declared a 10% stock dividend when the market value of each share was $25. the entry to record the dividend declaration is:

Answer 1

Global Corporation's declaration of a 10% stock dividend on 55,000 shares when the market value is $25 per share results in 5,500 additional shares. The journal entry records $137,500 in stock dividends distributed as $110,000 in Stock Dividends Distributable and $27,500 in Paid-in Capital in Excess of Par.

Step-by-step explanation:

When a corporation like Global Corporation declares a stock dividend, they are choosing to pay shareholders with additional shares instead of cash. Given the company's decision to declare a 10% stock dividend when the market value is $25 per share, we can calculate the dividend as follows:

• Number of new shares to be distributed = 10% of 55,000 = 5,500 shares
• The entry for the dividend declaration would be at the market value, hence: 5,500 shares × $25 = $137,500

The journal entry to record this transaction on the declaration date at market value would debit Stock Dividends for $137,500 and credit Stock Dividends Distributable with the par value amount (5,500 × $20 = $110,000) and credit Paid-in Capital in Excess of Par for the remaining amount ($137,500 - $110,000 = $27,500).