Question

A company originally issued​ 13,000 shares of​ $6 par value common stock at​ $12 per share. The board of directors declares a​12% stock dividend when the market price of the stock is​ $22 a share. Which of the following is included in the entry to record the declaration of a stock​ dividend?

A. Stock Dividends is credited for​ $34,320.
B. Stock Dividends is debited for​ $34,320.
C. Paid-In Capital in Excess of Parlong dash—Common is credited for​ $18,720.
D. Stock Dividends is debited for​ $18,720

Answer 1

no option is correct

Step-by-step explanation:

stocks to be distributed = 13,000 x 12% = 1,560

1,560 stocks x $22 = $34,320

• 1,560 x $6 = $9,360
• 1,560 x ($22 - $6) = $24,960

the journal entry to record the declaration of a small stock dividend (less than 20% of outstanding stocks) should be:

Dr Retained earnings (1,560 x $22) 34,320

Cr Common stock dividend distributable (1,560 x $6) 9,360

Cr Additional paid in capital 24,960