Question

Mustang Corporation had 100,000 shares of $2 par value common stock outstanding. On December 31, 2018, the company's board of directors declares a 20 percent stock dividend. This stock dividend will be distributed on January 20, 2019 to the stockholders of record on January 15, 2019. The market price of the company's stock is $10 per share on December 31, 2018.

Required:
Complete the necessary journal entry to record.

Answer 1

Answer:please see answer in explanation column

Step-by-step explanation:

Journal entry for December 31st , 2018

Date Account Debit Credit

31-Dec Retained Earning $200,000

Common stock distributable $40,000

Addtional Paid in capital in excess of Par $160,000

Calculation:

Total Number of shareS= 100000

Value per share= $2

The market value of stock=$10

declared Stock Dividend =20%

Total Number of new stock to be issued to shareholder

= (100000 X 20%) = 20,000 shares

Retained Earning = 20000 shares x $10 market value= $200,000

Common stock=20000 shares x $2 Par value = $40,000

Paid up capital in excess of Par =20000 shares x ($10 -$2) = $160,000

Journal to record Stock dividend distributed on Jan 20, 2019 to the stockholder on record on Jan 15, 2019)

Date Account Debit Credit

Jan 20 Common stock dividend distributable $40,000

Common stock $40,000

Calculation

Common stock dividend distributable =20000 shares x $2 Par value = $40,000