Question

The shareholders’ equity of Core Technologies Company on June 30, 2017, included the following: Common stock, $1 par; authorized, 6 million shares; issued and outstanding, 1 million shares $ 1,000,000 Paid-in capital—excess of par 4,000,000 Retained earnings 15,000,000 On April 1, 2018, the board of directors of Core Technologies declared a 10% stock dividend on common shares, to be distributed on June 1. The market price of Core Technologies’ common stock was $34 on April 1, 2018, and $44 on June 1, 2018.

Required: Complete the below table to calculate the stock dividend. Prepare the journal entries to record the declaration and distribution of the stock dividend.

The shareholders’ equity of Core Technologies Company on June 30, 2017, included the following:

Common stock, $1 par; authorized, 6 million shares; issued and outstanding, 1 million shares	$	1,000,000
Paid-in capital—excess of par		4,000,000
Retained earnings		15,000,000

Answer 1

When a stock dividend is declared, it is recorded at the market price of the stock at the date of declaration. The market price of the stock at the date of distribution is irrelevant.

The 10% stock dividend would result in 100,000 shares (10% x 1 million)

Journal

Date	Account title	Debit	Credit
	Entry to record declaration of stock dividend
April 1	Retained earnings	3,400,000
	Common stock dividend distributable		100,000
	Paid in capital in excess of par value (100,000 x 33)		3,300,000
	Entry to issue dividend shares
June 1	Common stock dividend distributable	100,000
	Common stock		100,000

The shareholders’ equity of Core Technologies Company on June 30, 2018. (After stock dividend)

Common stock, $1 par; authorized, 6 million shares; issued and outstanding, 1,100,000	$	1,100,000
Paid-in capital—excess of par		7,300,000
Retained earnings		11,600,000