Superior Company had 50,000 shares of $100 par value common stock outstanding on June 30. On July 1, the board of directors declared a 10% stock dividend when the market value of each share was $108.
The journal entry on July 1 will include:
Select one:
a. A debit to Retained Earnings for $500,000
b. A credit to Paid-in capital in excess of par value $540,000.
c. A credit to Stock Dividend Distributable for $500,000
d. A credit to Stock Dividend Distributable for $540,000
Correct answer------------d. A credit to Stock Dividend Distributable for $540,000
On declaration of stock dividend Stock dividend will be credited and retained earnings will be debited by $540,000. Calculations are given below.
| Outstanding shares before stock dividend | 50000 |
| Stock dividend rate | 10% |
| New shares to be issued (50000 x 10%) | 5000 |
| Market value per share | $ 108.00 |
| Value of stock dividend | $ 540,000.00 |
Superior Company had 50,000 shares of $100 par value common stock outstanding on June 30. On...