Wildcat, Inc. declared a 10% stock dividend when it had 150,000 shares of $1 par value common stock outstanding. The market price per share of common stock was $10 per share when the dividend was declared. The entry to record the stock dividend would include a credit to:

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A stock dividend transfers a portion of retained earnings to paid-in capital. The amount to be transferred is the fair market value of the stock issued. In this case, the fair market value of the 10% stock dividend is $10 x 0.10 x 150,000 = $150,000. Since the par value of the common stock remained unchanged, the entire $150,000 is transferred to Paid-in Capital in Excess of Par. Therefore, the entry to record the stock dividend would include a credit to Paid-in Capital in Excess of Par $135,000 (10% x 150,000 x $9), and a credit to Common Stock $15,000 (10% x 150,000 x $1). Retained Earnings would not be credited.