Chapter 16, Problem 3RE

### Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Chapter
Section

### Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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# Pickens Corporation declares and issues a 10% stock dividend. On the date of declaration, the stock is selling for $30 per share. Assuming that there were 50,000 shares previously outstanding, with a$10 par value, prepare the journal entry on the date of declaration to record Pickens’s stock dividend.

To determine

Prepare journal entry to record the given transaction.

Explanation

Stock dividends:

Stock dividends are the number of shares issued by a company to the existing shareholders in a proportion to the number of shares owned by each shareholder, based on a stock dividend percentage.

Prepare journal entry to record the given transaction.

 Date Account Titles and explanation Debit ($) Credit ($) Retained earnings 150,000 Common stock to be distributed (2) 50,000 Additional paid-in capital from stock      dividend 100,000 ( To record declaration of stock dividend)

(Table 2)

• Retained earnings are a component of stockholders equity and there is a decrease in the value of the retained earnings. Hence, debit the retained earnings by $150,000. • Common stock to be distributed is a component of stockholders equity and there is an increase in the value of the equity. Hence, debit the common stock to be distributed by$50,000.
• Additional paid-in capital from stock dividend is a component of stockholders equity and there is an increase in the value of the equity...

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