Question

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Silver Dollar Corp. had the balances below on January 15, 2015, in its stockholders’ equity accounts....

Silver Dollar Corp. had the balances below on January 15, 2015, in its stockholders’ equity accounts. On that same day, the company declared a 2% stock dividend, when the stock had a current market value of $20 per share. The stock dividends are distributed on February 20, 2015. Prepare the journal entries required on each date.

Common Stock, $2 par (100,000 shares issued) $ 200,000
Paid-In Capital in Excess of Par—Common Stock 470,000
Retained Earnings 1,060,000

Expert Solution

Number of common stock outstanding = 100,000

Current market value of 1 common stock = $20

Stock dividend declared = 2%

Hence, number of shares to be issued = 100,000 x 2%

= 2,000

Hence, amount to be debited to retained earnings = Number of shares to be issued x Current market value of 1 common stock

= 2,000 x 20

= $40,000

Amount to be credited to common stock dividend distributable = Number of shares to be issued x Par value per share

= 2,000 x 2

= $4,000

Amount to be credited to Paid in capital, in excess of par - common stock = Number of shares to be issued x (market value of 1 common stock - Par value per share)

= 2,000 x (20 - 2)

= $36,000

Journal

Date	Account title	Debit	Credit

Jan. 15	Retained earnings	40,000
	Common stock dividend distributable		4,000
	Paid in capital in excess of par value		36,000
	(To record declaration of stock dividend
Feb 20	Common stock dividend distributable	36,000
	Common stock		36,000
	(To record issue of dividend shares)

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ekkarill92 answered 1 year ago

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