Question

Mustang corporation had 100,000 shares of $2 par value common stock outstanding. on december 31, 2021, the company's board of directors declares a 50 percent stock dividend. this stock dividend will be distributed on january 20, 2022 to the stockholders of record on january 15, 2022. the market price of the company's stock is $10 per share on december 31, 2021.

Answer 1

The journal entry to record Mustang Corporation's issuance of dividends on December 31, 2021 is:

Date                Account title                                      Debit               Credit

12/31/2021       Retained earnings                      $100,000

                       Common stock Dividend                                     $100,000

What is the journal entry for the dividend issuance?

The dividend would be:

= Percentage dividend x Number of shares x Par value of shares

= 50% x 100,000 x 2

= $100,000

This amount will be debited to the Retained Earnings account which dividends are deducted from.

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