Question

On January 1, 2016, Alpha Corporation had 300,000 shares of common stock outstanding with a par value of $3 per share. On March 31, Alpha Corporation declared a 10% stock dividend when the market value was $8 per share. Use this information to prepare the General Journal entry (without explanation) for March 31. If no entry is required then write "No Entry Required."

Answer 1

Number of common shares outstanding = 300,000

Market price of 1 share on March 31 = $8

Stock dividend declared = 10%

Number of shares to be issued in stock dividend = Number of common shares outstanding x Stock dividend declared

= 300,000 x 10%

= 30,000

Par value of 1 share = $3

Retained earnings will be debited by = Number of shares to be issued in stock dividend x Market price of 1 share on March 31

= 30,000 x 8

= $240,000

Common stock dividend distributable will be credited = Number of shares to be issued in stock dividend x Par value of 1 share

= 30,000 x 3

= $90,000

Paid in capital in excess of par will be credited by = Number of shares to be issued in stock dividend x (Market price of 1 share on March 31- Par value of 1 share)

= 30,000 x (8-3)

= 30,000 x 5

= $150,000

Journal entry March 31, will be as under:

Date	General Journal	Debit	Credit
March 31	Retained earnings	$240,000
	Common stock dividend distributable		$90,000
	Paid in capital in excess of par		$150,000