Question

On January 1, Soft Corporation had 80,000 shares of $10 par value common stock outstanding. On June 17, the company declared a 10% stock dividend to stockholders of record on June 20. Market value of the stock was $15 on June 17. The stock was distributed on June 30. The entry to record the transaction of June 30 would include a

A) credit to Common Stock for $80,000.
B) debit to Common Stock Dividends Distributable for $120,000.
C) credit to Paid-in Capital in Excess of Par for $40,000.
D) debit to Stock Dividends for $40,000.

Answer 1

The correct answer to the student's question would be C) credit to Paid-in Capital in Excess of Par for $40,000.

Step-by-step explanation:

The entry to record the transaction of June 30 would include a debit to Stock Dividends for $40,000.

When a company declares a stock dividend, it means that additional shares of stock are being distributed to existing shareholders instead of cash. In this case, Soft Corporation declared a 10% stock dividend on June 17, which means that for every 10 shares of stock held, shareholders received an additional share.

On June 30, the stock dividend was distributed, so the entry to record the transaction would include a debit to Stock Dividends for the value of the additional shares, which is $40,000 (10% of $400,000, the market value of the stock on June 17).