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On January 1, Hamblin Corporation had 120,000 shares of $10 par value common stock outstanding. On...

On January 1, Hamblin Corporation had 120,000 shares of $10 par value common stock outstanding. On March 17 the company declared a 10% stock dividend to stockholders of record on March 20. Market value of the stock was $13 per share on March 17. The entry to record the transaction of March 17 would include a

Group of answer choices

debit to Common Stock Dividends Distributable for $120,000.

credit to Stock Dividends for $36,000.

credit to Cash for $156,000.

credit to Common Stock Dividends Distributable for $120,000.

Solutions

Expert Solution

$10 par value shares of common stock outstanding = 120,000

Current market value of 1 common stock = $13
Stock dividend declared = 10%
Hence, number of shares to be issued = 120,000 x 10%
= 12,000
Amount to be debited to retained earnings = Number of shares to be issued x Current market value of 1 common stock
= 12,000 x 13
= $156,000
Amount to be credited to common stock dividend distributable = Number of shares to be issued x Par value per share
= 12,000 x 10
= $120,000
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)
= 12,000 x (13 - 10)
= $36,000

Date General Journal Debit Credit
March 17 Retained earnings $156,000
Common Stock Dividends Distributable $120,000
Pain in capital in excess of par $36,000

credit to Common Stock Dividends Distributable for $120,000

Fourth option is correct.

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ekkarill92 answered 1 year ago
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