Companies could declare STOCK DIVIDENDS and not spend CASH If the company above

Question

Companies could declare STOCK DIVIDENDS and not spend CASH If the company above only had Common Stock, 250,000 Authorized, and the number of shares sold-issued-was 18,000 before the 2 sales up above, and there were no shares in the Treasury- AND-- the first sale above was the most recent sale of stock transaction (and is the true measurement of current Market Valuc)- how many shares would be issued and how much$$ would the DEBIT to Retained Earnings be IF They declared a 10% STOCK DIVIDEND They declared a 30% STOCK DIVIDEND

Explanation / Answer

Assume the share par value is $10.

Declare a 10% stock dividend = 18000 share + (10% * 18000)

= 18000 + 1800

= 19800 shares

Entry :

1.) Retained earning Dr.$198000

To stock dividend payable(19800 * $10) $198000   

(Being Stock dividend due)

2 .) Stock dividend payable Dr.$198000

To common Stock 198000

(Being stock dividend issued)

Declare a 30% stock dividend =18000 shares +( 30% *18000)

= 18000 + 5400

= 23400 shares

Entry :

1.) Retained earning Dr.$234000

To stock dividend payable(23400 * $10) $234000

(Being Stock dividend due)

2 .) Stock dividend payable Dr.$234000

To common Stock $234000

(Being stock dividend issued)

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