Question

Stock Dividends

Witt Corporation has 80,000 shares of $5 par value common stock outstanding. At year-end, the company declares a five percent stock dividend. The market price of the stock on the declaration date is $20 per share. Four weeks later, the company issues the shares of stock to stockholders.

a. Prepare the journal entry for the declaration of the stock dividend.
b. Prepare the journal entry for the issuance of the stock dividend.
c. Assume that the company declared a 30 percent stock dividend rather than a five percent stock dividend. Prepare the journal entries for (1) the declaration of the stock dividend and (2) the issuance of the stock dividend.

Answer 1

a) Journal entry

Date	account and explanation	Debit	Credit
	Stock dividend (80000*5%*20)	80000
	Common Stock dividend distributable		20000
	Paid in capital in excess of par value-Common Stock		60000

b) Journal entry

Date	account and explanation	Debit	Credit
	Common Stock dividend distributable	20000
	Common Stock		20000

d) Journal entry

Date	account and explanation	Debit	Credit
	Stock dividend (80000*30%*5)	120000
	Common Stock dividend distributable		120000

Date	account and explanation	Debit	Credit
	Common Stock dividend distributable	120000
	Common Stock		120000