Question

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The company declared a 20% stock dividend on 100,000 shares of $10 par value stock. At the time of declaration, the company’s stock was trading at $24.50 on the open market. Use the following table showing the equity accounts to record the necessary journal entries related to the declaration and distribution of the stock dividend:

	2020	2019
Common Stock, $10 Par Value	$1,000,000	$   1,000,000
Preferred Stock, $100 Par Value	500,000	350,000
Paid-in Capital in Excess of Par Value, Common Stock	2,000,000	2,000,000
Retained Earnings	1,500,000	1,000,000
Treasury Stock	(500,000)	(500,000)

Answer 1

WORKING NOTES:
		CALCULATION OF TOTAL VALUE OF STOCK DIVIDEND IS PAID
		Numer of Common Shares Issued and outstanding = (A)	1,00,000	Shares
		Stock Dividend Declared % of total shares issued and outstanding (B)	20%
		Stock Dividend Declared Shares to be issued (C = AXB)	20,000	Shares
		Market Value of 1 Shares on date of declaration (D)	$                       24.50	Per Shares
		Par Value of the one shares ('E)	$                       10.00	Per Shares
		Addittional Paid in Captial (Market Value - Par Value) (F)	$                       14.50	Per Shares
		Total value of dividend = (CXD)	$                 4,90,000
		Par value of the Common Stock Dividend (CXE)	$                 2,00,000
		Value of Addittional paid in Capital (CXF)	$                 2,90,000
SOLUTION :
Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit
1	----------	Stock Dividends	$4,90,000
		Stock Dividend Distributable		$2,00,000
		Paid in Capital in Excess of Par - Common Stock		$2,90,000
		(To record the stock dividend declaration)
3	----------	Stock Dividend Distributable	$2,00,000
		Common Stock		$2,00,000
		(To record the stock dividend distribtion)