How would I even go about solvng this? QUESTION 6 Partially correct 1-00 points

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How would I even go about solvng this?

QUESTION 6 Partially correct 1-00 points out of 1.50 Remove flag Large Stock Dividend and Forward Stock Split Key Corporation has 50,000 shares of $10 par value common stock outstanding and retained earnings of $820,000. The company declares a 100 percent stock dividend. The market price at the declaration date is $17 per share. Prepare the journal entries for (1) the declaration of the dividend and (2) the issuance of the dividend. General Journal Ref Description Debit Credit 1) Stock Dividends $ 850,000 X $ Stock Dividend Distributable 320,000x To record declaration of stock dividend. 2.) Stock Dividend Distributable 850,000 X Common Stock To record issue of stock dividend. Check

Explanation / Answer

normally stock dividend will issue at market value. but here in this question retained earnings is $820,000 only. so maximum dividend that company can issue is $820,000 only. they cannot issue more than retained earnings. so value will be $820,000. in 2nd entry

Debit stock dividend distributable $820,000

Credit Common stock (50,000*$10) $500,000

Credit Additional paid in capital ($820,000 - $500,000) $320,000

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