Question

On January 1, Lang, Inc. has 100,000 shares of stock issued and outstanding. The board of directors of Lang wants to authorize a large stock dividend. This means that they must authorize a stock dividend of at least ______ shares of stock.

Answer 1

Answer: 50% of stock

Explanation: Assuming a stock dividend of 50 percent and using the share values in the example above, on the declaration date the following entry is made: debit retained earnings $100 (500 shares x 20 cents) and credit common stock dividend distributable $100. When the stock is actually distributed, the following entry is made: debit common stock dividend distributable $100, credit common stock $100.