On sep 15, 2020 cox corp declared and issued a 40% stock dividend. prior to this...
On sep 15, 2020 cox corp declared and issued a 40% stock dividend. prior to this dividend cox has 10k shares of 5 par value and outstanding. the market price of Cox's common stock on Sep 15 was $12 per share. As a result of this stock dividend by how much will retained earning account increase or decrease?
a. -20k
b. -50k
c. 0
d. -48k
e. -120k
Homework Answers
The correct answer is "a. -20k"
Reason: Since stock dividend of 40% is in the nature of large stock dividend, following entry will be passed:
| Date | Account Title and Explanations | Debit | Credit |
| Sep 15, 2020 | Retained Earnings (10,000 shares*40%*$5) | 20,000 | |
| Common stock dividend distributable | 20,000 |
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