Question

The shareholders' equity of Core Technologies Company on June 30, 2017, included the following: Common stock, $1 par; authorized, 7 million shares; issued and outstanding, 3 million shares Paid-in capital excess of par Retained earnings $ 3.000.000 12,000,000 16.000.000 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 $36 on April 1, 2018, and $46 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. Complete this question by entering your answers in the tabs below. Stock Dividend General Journal Complete the below table to calculate the stock dividend Stock Dividend Number of outstanding shares Stock dividend percentage (%) Number of shares to be issued Value of stock dividend <Stock Dividend General Journal >

Answer 1

Solution:

1. Valuation of Stock Dividend

Stock dividend is always calculated on face value not on market value. Therefore, the market price as on 1/4/2018 worth $36 and as on 1/6/2018 worth $46 is of no use.

Stock Dividend = [No. of issued and outstanding shares * face value] * Rate of dividend

                                = $ [3,000,000 * 1] * 10%

                                = $ 3,000,000 * 10%

                                = $ 300,000

      2.                                                                  Journal entry

Date	General Journal	Debit	Credit
1/04/18	Retained Earnings          To Dividend Payable A/c (Entry for stock dividend declared )	$300,000	$300,000
1/06/18	Dividend Payable         To Cash/Bank (Entry for Stock dividend paid to stockholders)	$300,000	$300,000