Question

Fowler, Inc., declared a 4 percent stock dividend on its 750,000 shares of common stock. The $10 par value common stock was originally sold for $14 and was selling at $17 at the time the stock dividend was declared Prepare the general Journal entries to record and distribute the stock dividend (if no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 Record declaration of stock dividend. Note: Enter debts before credits Transaction General Journal Debit Credit Record entry Clear entry View general journal

Answer 1

To record the 4 percent stock dividend declared by Fowler, Inc., debit the Stock Dividends account and credit both the Common Stock Dividend Distributable account and Paid-in Capital over Par, Common Stock account.

Step-by-step explanation:

When Fowler, Inc. declares a 4 percent stock dividend on its common stock, it must make the appropriate accounting entries to reflect this event in its financial records. Given that Fowler, Inc. has 750,000 shares outstanding with a $10 par value and the stock is trading at $17, the stock dividend involves a distribution of an additional 30,000 shares (4% of 750,000 shares). The accounting entries would be as follows:

1. Debit the Stock Dividends account for the market value of the stock dividend, which is the number of new shares multiplied by the market price at the time the dividend is declared (30,000 shares × $17 = $510,000).
2. Credit the Common Stock Dividend Distributable account for the par value of the new shares to be distributed (30,000 shares × $10 = $300,000).
3. Credit the Paid-in Capital over Par, Common Stock for the remainder (the difference between the market value and the par value of the new shares, which is $510,000 - $300,000 = $210,000).