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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Entries for stock dividends

Antique Buggy Corporation has 820,000 shares of $35 par common stock outstanding. On June 8, Antique Buggy Corporation declared a 5% stock dividend to be issued August 12 to stockholders of record on July 13 - The market price of the stock was $63 per share on June 8. Journalize the entries required on June 8. July 13, and August 12.

To determine

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 transactions made on June 8, July 13, and August 12.

Explanation

Prepare the journal entry for the declaration of stock dividend on September 2 in the books of Corporation AB.

Date Account Titles and Explanation Post Ref. Debit ($) Credit ($)
June 8 Stock Dividends                            (2) 1,620,000

         Common Stock Dividends

         Distributable                         (3)

225,000

         Paid-in Capital in Excess of Par

         Value-Common stock          (4)

1,395,000
(To record the declaration of common stock dividend)

Table (1)

Working Notes:

Compute the number of shares to be distributed as stock dividends.

Stock dividends shares = {Number of shares outstanding × Stock dividend percentage}= 820,000 shares × 5%= 41,000 shares (1)

Compute amount of stock dividends.

Stock dividends = Stock dividend shares × Market value per share=41,000 shares(1) × $63= $2,583,000 (2)

Compute the amount of common stock dividends distributable.

Common stock valuedividends distributable} = Stock dividend shares × Par value of stock= 41,000 shares × $35= $1,435,000 (3)

Compute paid-in capital in excess of par-common stock

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