Brooks Inc.has 750,000 common shares outstanding with a recorded book value of $15,000,000.On December 1st when their shares were trading at $30 they declared and distributed a 10% stock dividend.Which of the following journal entries would Brooks Inc.use to record the event?

A. Dr. Retained earnings $\quad 2,250,000$
Cr. Common shares $\quad 2,250,000$

B. Dr. Retained earnings $\quad 1,500,000$
Cr. Common shares $\quad 1,500,000$

C. Dr. Retained earnings $\quad 750,000$
Cr. Common shares$\quad 750,000$

D. No journal entry is required

Question

Brooks Inc.has 750,000 common shares outstanding with a recorded book value of $15,000,000.On December 1st when their shares were trading at $30 they declared and distributed a 10% stock dividend.Which of the following journal entries would Brooks Inc.use to record the event?

A. Dr. Retained earnings $\quad 2,250,000$
Cr. Common shares $\quad 2,250,000$

B. Dr. Retained earnings $\quad 1,500,000$
Cr. Common shares $\quad 1,500,000$

C. Dr. Retained earnings $\quad 750,000$
Cr. Common shares$\quad 750,000$

D. No journal entry is required

Quizplus · Accepted Answer

A 10% stock dividend on 750,000 shares at a market price of $30 per share results in a total value of $2,250,000 (750,000 shares * 10% * $30). This amount is transferred from Retained Earnings to Common Shares.

Brooks Inc 2,250,000\quad 2,250,0002,250,000 Cr Common Shares 2,250,000\quad 2,250,0002,250,000 B Dr Retained Earnings

Brooks Inc $\quad 2,250,000$ Cr Common Shares $\quad 2,250,000$ B Dr Retained Earnings