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Entries for stock dividends Alpine Energy Corporation has 1,500,000 shares of $40 par common stock outstanding. On August 2, Alpine Energy declared a 4% stock dividend to be issued October 8 to stockholders of record on September 15. The market price of the stock was $70 per share on August 2. Journalize the entries required on August 2, September 15, and October 8.
Corporate Financial Accounting
Solutions
Corporate Financial Accounting
Entries for stock dividends
Alpine Energy Corporation has 1,500,000 shares of $40 par common stock outstanding. On August 2, Alpine Energy declared a 4% stock dividend to be issued October 8 to stockholders of record on September 15. The market price of the stock was $70 per share on August 2. Journalize the entries required on August 2, September 15, and October 8.
Stock Dividends: It refers to the payment of dividends by a company to its existing shareholders, in the form of additional shares rather than cash. Stock dividends are paid, when there is inadequate cash availability in the company.
To prepare: The journal entry for the declaration of stock dividend on August 2 in the books of Corporation AE.
Explanation of Solution
- Stock Dividends is a contra stockholders’ equity account with a normal debit balance. Increase in stock dividend decreases the stockholders’ equity account. Therefore, debit Stock Dividends account with $4,200,000.
- Common Stock Dividends Distributable is a component of stockholders’ equity account, and the amount is increased due to the declaration of stock dividends...
To prepare: The journal entry, to record the distribution of stock dividend on October 8 for Corporation AE.
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