# Entries for stock dividends Pro-Builders Corporation has 1,500,000 shares of $5 par common stock outstanding. On September 2, Pro-Builders Corporation declared a 3% stock dividend to be issued November 30 to stockholders of record on October 3. The market price of the stock was$36 per share on September 2. Journalize the entries required on September 2, October 3, and November 30.

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 13, Problem 4PEA
Textbook Problem
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## Entries for stock dividendsPro-Builders Corporation has 1,500,000 shares of $5 par common stock outstanding. On September 2, Pro-Builders Corporation declared a 3% stock dividend to be issued November 30 to stockholders of record on October 3. The market price of the stock was$36 per share on September 2.Journalize the entries required on September 2, October 3, and November 30.

To determine

Prepare the journal entry for the transactions made on September 2, October 3, and November 30.

### Explanation of Solution

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.

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

 Date Account Titles and Explanation Post Ref. Debit ($) Credit ($) September 2 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)

• 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 $1,620,000. • Common Stock Dividends Distributable is a component of stockholders’ equity account, and the amount is increased due to the declaration of stock dividends. Therefore, credit Common Stock Dividends Distributable account with$225,000.
• Paid-in Capital in Excess of Par Value - Common stock is a component of stockholders’ equity account, and the amount is increased due to the increase in capital excess of common stock value. Therefore, credit Paid-in Capital in Excess of Par Value account with $1,395,000. Working Notes: (1) Compute the number of shares to be distributed as stock dividends. Stock dividends shares = {Number of shares outstanding × Stock dividend percentage}= 1,500,000 shares × 3%= 45,000 shares (2) Compute amount of stock dividends. Stock dividends = Stock dividend shares × Market value per share=45,000 shares(1) ×$36= \$1,620,000

(3)

Compute the amount of common stock dividends distributable

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