Stock Dividends Witt Corporation has 72,000 shares of $5 par value common stock

Question

Stock Dividends

Witt Corporation has 72,000 shares of $5 par value common stock outstanding. At year-end, the company declares a four percent stock dividend. The market price of the stock on the declaration date is $21 per share. Four weeks later, the company issues the shares of stock to stockholders.

a. Prepare the journal entry for the declaration of the stock dividend.
b. Prepare the journal entry for the issuance of the stock dividend.
c. Assume that the company declared a 40 percent stock dividend rather than a four percent stock dividend. Prepare the journal entries for (1) the declaration of the stock dividend and (2) the issuance of the stock dividend.

Explanation / Answer

a Retained earnings 60480 =72000*4%*21       Stock Dividend Distributable 14400 =72000*4%*5       Paid in Capital in Excess of Par Value 46080 b Stock Dividend Distributable 14400        Common Stock 14400 c Retained earnings 144000 =72000*40%*5       Stock Dividend Distributable 144000 Stock Dividend Distributable 144000        Common Stock 144000

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