Table 14-1
The board of directors declares a 10% stock dividend. There are 20,000 common shares authorized and 10,000 outstanding common shares. The current market price of the shares is $12 per share; the average issue price was $10 per share.
-Refer to Table 14-1.The entry to distribute the shares will require a:

Question

Quizplus · Accepted Answer

To distribute stock dividends, a debit to Common Stock Dividend Distributable account is required. The value of the stock dividend distributable is determined by multiplying the number of outstanding shares by the dividend rate (10%). 
Number of outstanding shares = 10,000. 
10% stock dividend = 10% x 10,000 = 1,000 shares.
Market price per share = $12. 
Therefore, the stock dividend distributable equals 1,000 shares x $12 per share = $12,000. The entry to distribute the shares will require a debit to Common Stock Dividend Distributable for $12,000. There is no debit to Common Shares or Retained Earnings since the company is distributing its own shares and not buying them back or paying cash dividends.

Table 14-1 The Board of Directors Declares a 10% Stock Dividend. There