Question

Ayayai Corp. has 320,000 shares of $10 par value common stock outstanding. It declares a 14% stock dividend on December 1 when the market price per share is $17. The dividend shares are issued on December 31. Prepare the entries for the declaration and distribution of the stock dividend.

Answer 1

320,000 stocks with $10 par value

14% stock dividend (small stock dividend ≤ 20%)

so we will use the market price of the stocks = $17 x 320,000 x 14% = $761,600 total distribution

320,00 x 14% = 44,800 stocks x $10 par value = $448,000

the additional paid in capital = $761,600 - $448,000 = $313,600

December 1, declaration of stock dividend

Dr Retained earnings 761,600

Cr Common stock dividends distributable 448,000

Cr Additional paid in capital in excess of par value 313,600

December 31, distribution of stock dividends

Dr Common stock dividends distributable 448,000

Cr Common stock 448,000