A corporation had 10,000 shares of $10 par value common stock outstanding.The board of directors declared and issued a 10% stock dividend.The market value of the stock was $20 per share.What is the journal entry to record this stock dividend?
A)Debit Retained Earnings and credit Common Stock for $20,000.
B)Debit Retained Earnings and credit Common Stock for $10,000.
C)Debit Retained Earnings for $20,000,credit Common Stock for $10,000,and credit Additional Paid-in Capital for $10,000.
D)No entry is made to record the stock dividend.

Question

Quizplus · Accepted Answer

Since this is a small stock dividend,the journal entry to record this stock dividend includes a debit to Retained Earnings for $20,000 (or 10,000 shares × 0.10 × $20 market value per share),a credit to Common Stock for $10,000 (or 10,000 shares × 0.10 × $10 par value per share),and a credit to Additional Paid-in Capital for $10,000 [or 10,000 shares × 0.10 × ($20 market value per share − $10 par value per share)].

A Corporation Had 10,000 Shares of $10 Par Value Common