Question

PREPARE THE FOLLOWING PAYCHECK ENTRIES:

Related to stock dividends:

Mercado, Inc. has the following balances in its capital account.
Common Stock: $300,000 at an even value of $50.00
Paid in Capital: 62,500
Retained Earnings: 471,000
The Board of Directors declared a 1% stock dividend when the market price of the shares was $76.00 per share.

Required:

Make the day's wage entries for the record:
1.   Dividend declaration.
2.   The issuance of the stock certificate.

Answer 1

WORKING NOTES:
		CALCULATION OF TOTAL VALUE OF STOCK DIVIDEND IS PAID
		Numer of Common Shares Issued and outstanding = $ 300,000 / $ 50 =	6,000	Shares
		Stock Dividend Declared = 6,000 Shares X 1%	60	Shares
		Market Value of 1 Shares on date of declaration	$                             76	Per Shares
		Total value of dividend = 60 Shares X $ 76	$                       4,560
		Par value of the 60 shares = 60 Shares X $ 50 =	$                       3,000
		Paid in capital in excess of par - Common Stock ($ 4,560 - $ 3,000)	$                       1,560
SOLUTION : 1 & 2
Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit
1	----------	Stock Dividends	$4,560
		Stock Dividend Distributable		$3,000
		Paid in Capital in Excess of par - Common Stock		$1,560
		(To record the stock dividend declaration)
2	----------	Stock Dividend Distributable	$3,000
		Common Stock		$3,000
		(To record the stock dividend distribtion)