When a corporation declares a 5% stock dividend,the journal entry will include:

Question

Quizplus · Accepted Answer

When a corporation declares a stock dividend, it results in the transfer of a portion of retained earnings to a separate account called Common stock dividend distributable. Therefore, the journal entry will include a debit to retained earnings and a credit to common stock dividend distributable. There is no direct debit to common shares or credit to retained earnings. Option A is incorrect as there is no liability involved in stock dividends. Option B is incorrect as it suggests a direct debit to common shares, which is not appropriate.

When a Corporation Declares a 5% Stock Dividend,the Journal Entry