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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
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 $10 par value, prepare the journal entry on the date of declaration to record Pickens’s stock dividend.
Prepare journal entry to record the given transaction.
Stock dividends:
Stock dividends are the number of shares issued by a company to the existing shareholders in a proportion to the number of shares owned by each shareholder, based on a stock dividend percentage.
Prepare journal entry to record the given transaction.
| Date | Account Titles and explanation | Debit ($) | Credit ($) |
| Â | Retained earnings | 150,000 | Â |
| Â | Â Â Â Â Common stock to be distributed (2) | Â | 50,000 |
| Â |
     Additional paid-in capital from stock      dividend |  | 100,000 |
| Â | ( To record declaration of stock dividend) | Â | Â |
(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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