Question

 Stock Dividends

 Witt Corporation has 80,000 shares of S5 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. Number of outstanding shares = 80,000

Stock dividend = 5%

Number of shares issued in stock dividend = 80,000 x 5%

= 4,000

General Journal
Ref.	Description	Debit	Credit
a.	Stock dividends	$80,000
	Stock dividends distributable		$20,000
	Paid in capital in excess of par value		$60,000
	( To record declaration of stock dividend)
b.	Stock dividends distributable	$20,000
	Common stock		$20,000
	( To record issued common stock for stock dividend)
c. 1	Stock dividend	$120,000
	Stock dividends distributable		$120,000
	( To record declaration of stock dividend)
c. 2	Stock dividends distributable	$120,000
	Common stock		$120,000
	( To record issued common stock for stock dividend)

C.

Number of outstanding shares = 80,000

Stock dividend = 30%

Number of shares issued in stock dividend = 80,000 x 30%

= 24,000

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