Question

Bramble Corporation has 54,000 shares of $12 par value common stock outstanding. It declares a 15% stock dividend on December 1 when the market price per share is $16. The dividend shares are issued on December 31.Prepare the entries for the declaration and distribution of the stock dividend.Prepare for Dec.1 and Dec.31. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Answer:

December 1

Dr.   Retained Earning     $129,600

Cr.    Dividend Payable                    $129,600

December 31

Dr.  Dividend Payable                  $129,600

Cr.  Common stock                                            $97,200

Cr.  Add-in-capital above par common stock   $32,400

Explanation:

Working:

Dividend declared = 54,000 x 15% x $16 = 8,100 x $16 = $129,600

Common stock value = 8,100 x $12 = $97,200

Add-in-capital common share = 8,100 x ( $16 - $12 ) = $32,400

Dividend declared is credited to dividend payable account on December 1 by transferring balance from retained earning because dividend is declared and not been paid yet. On December 31 The stock dividend actually been issued to shareholders so the balance is transferred from dividend payable account to Common stock account and add in capital account.