Foster Corporation has 800,000 shares of $3 par value common stock authorized,and 350,000 shares issued and outstanding.The market value of the stock is $22 per share.The journal entry to record the declaration of a 75% stock dividend would include a:
A)credit to dividend payable for $1,800,000
B)credit to Common Stock Dividends Distributable for $787,500
C)debit to Retained Earnings for $5,775,000
D)credit to Common Stock Dividends Distributable for $4,987,500

Question

Quizplus · Accepted Answer

A stock dividend involves transferring amounts from retained earnings to paid-in capital accounts. For a 75% stock dividend on 350,000 shares, 262,500 additional shares are issued (350,000 * 75%). At a par value of $3, the journal entry includes a credit to Common Stock Dividends Distributable for $787,500 (262,500 shares * $3 par value).

Foster Corporation Has 800,000 Shares of $3 Par Value Common