lobal Corporation had 59,000 shares of $20 par value common stock outstanding on

Question

lobal Corporation had 59,000 shares of $20 par value common stock outstanding on July 1, Later that day the board of directors declared a 25% stock dividend when the market value of each share was $29. The entry to record the dividend declaration is: Multiple Choice Debit Retained Earnings $427,750; credit Cash $427750. Debit Retained Earnings $295,000; credit Common Stock Dividend Distributable $295,000. Debit Retained Earnings $427,750; credit Common Stock Dividend Distributable $295,000; credit Paid-In Capital in Excess of Par Value, Common Stock $132,750. credet Common Stock Didend Distributable $42750 Debit Retained Earnings $427,750; credit Common Stock Dividend Distributable $427750 No entry is made until the stock is issued.

Explanation / Answer

Answer is Debit Retained earnings $ 295000; Credit Common Stock Dividnd Distributable $ 295000 Explanation: Number of shares outstanding 59000 Number of shares declared as stock div. 14750 (59000 shares @ 25%) Issue price (at Par value) 20 Amount of Stockk dividend: 295000 Note: As the stock dividend is more than 20%, it’s a large dividend paid and hence issued at par value

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