Question

A corporation distributes a 10% common stock dividend on 30000 shares issued when the market value of its common stock is $24 per share and its par value is $2 per share dollars per share on the distribution date a credit for $___ would be journalized.A. $30,000B. $6,000C. $72,000D. $66,000

Answer 1

A corporation distributes a 10% common stock dividend on 30,000 shares.

The market value is $24 per share.

The par value is $2 per share.

We have to find the credit that is journalized the moment the distribution is made.

They paid a total amount in dividends that is 10% of the par value of the stock times the number of stocks:

`\begin{gathered} 10\%\cdot2\cdot30000 \\ 0.1\cdot2\cdot30000 \\ 6000 \end{gathered}`

Answer: the credit is $6,000 [Option B]