PAC Corporation has 500,000 shares of $5 par value common stock authorized,and 300,000 shares issued and outstanding.The market value of the stock is $14 per share.The journal entry to record the declaration of a 15% stock dividend would include a:
A)credit to dividend payable for $1,050,000
B)credit to Common Stock for $375,000
C)debit to Retained Earnings for $630,000
D)Credit to Stock Dividends Distributable for $375,000

Question

Quizplus · Accepted Answer

The stock dividend is 15% of 300,000 shares, which is 45,000 shares. The market value of the stock is $14 per share, so the total value of the dividend is 45,000 shares x $14 = $630,000. Therefore, Retained Earnings is debited for $630,000.

PAC Corporation Has 500,000 Shares of $5 Par Value Common