A corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record this dividend is:

Question

Quizplus · Accepted Answer

The entry to record a stock dividend includes a debit to retained earnings for the fair market value of the shares issued (50,000 shares x 10% x $27 = $135,000). The credit portion of the entry includes common stock dividend distributable for the par value of the shares issued (50,000 shares x 10% x $20 = $100,000) and the excess amount is credited to paid-in capital in excess of par value, common stock ($35,000). Therefore, choice C is the correct answer.

A Corporation Had 50,000 Shares of $20 Par Value Common