Question

Question 15 View Policies Current Attempt in Progress On October 10, the board of directors of Pinto Corporation declared a 10% stock dividend. On October 10, the company had 10,000 shares of $1 par common stock issued and outstanding with a market price of $16 per share. The stock dividend will be distributed on October 31 to shareholders of record on October 25. Journalize the entries needed for the declaration and distribution of the stock dividend. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Debit Credit Date Account Titles and Explanation Oct. 10 Oct. 31

Answer 1

Answer:

1. No entry is needed on the date of record. Here, October 25.

As, the company has declared 10% stock dividend it is like Small Stock Dividend

New shares issued = 10,000 shares * 10% = 1,000 shares

Retained Earnings will be debited for = $1,000 shares * Market Price per share

                                                                    = $1,000 * $16

                                                                    = $16,000

Common stock will be credited at par value = 1,000 shares * $1 = $1,000

Remaining balance from retained earnings will be credited to Additional paid-in capital or Securities Premium = $15,000

Date	Account Titles and Explanation	Debit	Credit
Oct.10	Retained Earnings A/c                                                                              Dr	$16,000
	To Common Stock dividend distributable A/c		$1,000
	To Additional Paid-in Capital (in excess of par) A/c		$15,000
	(Being 10% stock dividend declared, [10,000 * 10% = 1,000 shares])
Oct.31	Common Stock dividend distributable A/c                                        Dr	$1,000
	To Common Stock A/c		$1,000
	(Being Common Stock dividend is distributed)