In: Accounting
On January 1, Year 2, Zook Company had 26,000 shares of $1 par common stock outstanding. During October, Year 2, the company’s board of directors declared and distributed a 1% common stock dividend when the market value of its common stock was $56 per share. In recording this transaction, what amount will be debited to Retained earnings in the journal entry to record the stock dividend?
Outstanding number of shares = | 26,000 | Shares | |
1% common stock dividend = 1% of 26,000 Shares = | 260 | Shares | |
Market price per shares = | $ 56 | Per Shares | |
Par value of the shares = | $ 1 | Per Shares | |
There is 260 shares can be distributed as stock dividend | |||
Stock dividend will charged to retained earning on the basis of market value | |||
It means par value and excess of par value both will be debited to retained earnings | |||
Amount debited to retained earning = 260 Shares X $ 56 = | $ 14,560 | ||
Answer = Amount debited to stock dividend = $ 14,560 | |||