Nutritious Pet Food Company’s board of directors declares a large stock dividend (50%) on June 30 when the stock’s market value per share is $30. At that time, there are 10,000 shares of$1 par value common stock outstanding (none held in treasury). What is the journal entry to record the stock dividend distribution on July 31?

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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 14, Problem 13EB
Textbook Problem
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Nutritious Pet Food Company’s board of directors declares a large stock dividend (50%) on June 30 when the stock’s market value per share is $30. At that time, there are 10,000 shares of$1 par value common stock outstanding (none held in treasury). What is the journal entry to record the stock dividend distribution on July 31?

To determine

To journalize:

The transactions relating to reatined earnings.

Introduction:

Dividend is the sum of money which is regularly paid by the company after a specific period of time to its shareholders from the profits or reserves.

Explanation of Solution

Record distribution of stock dividend:

 Date Account Debit($) Credit($) July 31 Common stock dividend distributable 5,000 Common stock 5,0002 (To record distribution of 50% stock dividend.)

Table (1)

• Common stock dividend distributable is a liability account and it is decreased by $5,000. Therefore, debit the common stock dividend distributable accountwith$5,000.
• Common stock is an equity account and it is increased by $5,000. Therefore, common stock account is credited with$5,000...

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