Question 29 1. Hampton Company has 200,000 shares of $10 par value common stock

Question

Question 29
1.
Hampton Company has 200,000 shares of $10 par value common stock outstanding. On April 15, the company declared a 40% stock dividend. The current market value of the stock was $15 per common share. The journal entry on April 15 will include:
Answer

A. A credit to Paid in Capital in excess of par value, Common Stock for $400,000

B. A debit to Retained Earnings for $1,200,000

C. A credit to Common Stock Dividend Distributable for $800,000

D. A credit to Common Stock Dividends Distributable for $1,200,000

Explanation / Answer

A. A credit to Paid in Capital in excess of par value, Common Stock for $400,000

B. A debit to Retained Earnings for $1,200,000

C. A credit to Common Stock Dividend Distributable for $800,000

D. A credit to Common Stock Dividends Distributable for $1,200,000

dividend is always based on par value

200000*10=2000000

2000000*40%=800000

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