Question

The shareholders’ equity of Core Technologies Company on June 30, 2017, included the following:

Common stock, $1 par; authorized, 6 million shares; issued and outstanding, 1 million shares	$	1,000,000
Paid-in capital—excess of par		4,000,000
Retained earnings		15,000,000

On April 1, 2018, the board of directors of Core Technologies declared a 10% stock dividend on common shares, to be distributed on June 1. The market price of Core Technologies’ common stock was $34 on April 1, 2018, and $44 on June 1, 2018.

Required:
Complete the below table to calculate the stock dividend. Prepare the journal entries to record the declaration and distribution of the stock dividend.

Stock Dividend
Number of Outstanding Shares	?
Stock Dividend %	?
Number of shares to be issued	?
?	?
Value of stock dividend	?

Answer 1

Stock dividend is form of dividend payment.Additional shares are given by company rather than cash in form of dividend.Since percentage of stock dividend is less than 25% , so it is small stock dividend.Small stock dividend is recorded at fair value.

No of outstanding shares 1000000

Stock dividend (%) 10%

No of share issued 100000

Value of stock dividend 100000*34=$3400000

journal entry

Date Account title & explanation Debit Credit

4/1/2018 Retained Earning 3400000

Common stock distributable 3400000

   (To record declaration of dividend)

6/1/2018 Common stock distributable   3400000

Common stock 100000

Paid in capital in excess of par 3300000

   (To record distribution  of dividend)