On January 1, Soft Corporation had 80,000 shares of $10 par value common stock o
ID: 2480848 • Letter: O
Question
On January 1, Soft Corporation had 80,000 shares of $10 par value common stock outstanding. On June 17, the company declared a 10% stock dividend to stockholders of record on June 20. Market value of the stock was $15 on June 17. The entry to record the transaction of June 17 would include a
debit to Stock Dividends for $120,000.
credit to Cash for $120,000.
credit to Common Stock Dividends Distributable for $120,000.
credit to Common Stock Dividends Distributable for $40,000.
debit to Stock Dividends for $120,000.
credit to Cash for $120,000.
credit to Common Stock Dividends Distributable for $120,000.
credit to Common Stock Dividends Distributable for $40,000.
Explanation / Answer
On June 17, the company declared a 10% stock dividend to stockholders of record on June 20. Market value of the stock was $15 on June 17.
80,000 x 10% x $15 = $120,000 total dividend
80,000 x 10% x $10 = $80,000 par value
Dr Retained Earnings 120,000
Cr Common Stock Dividends Distributable 80,000
Cr Paid-In Capital in Excess of Par 40,000
The stock was distributed on June 17
Dr Common Stock Dividends Distributable 40,000
Cr Common Stock 40,000
The entry to record the transaction of June 17 would include a
debit to Stock Dividends for $120,000.