Question

Pro-Builders Corporation has 271,000 shares of $30 par common stock outstanding. On September 2, Pro-Builders Corporation declared a 3% stock dividend to be issued November 30 to stockholders of record on October 3. The market price of the stock was $49 per share on September 2.

Journalize the entries required on September 2, October 3, and November 30. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Number of shares outstanding = 271,000

Current market value of 1 stock = $49

Stock dividend declared = 3%

Hence, Number of shares to be issued = Number of shares outstanding x Stock dividend declared

= 271,000 x 3%

= 8,130

Hence, amount to be debited to retained earnings = Number of shares to be issued x Current market value of 1 stock

= 8,130 x 49

= $398,370

Amount to be credited to common stock dividend distributable = Number of shares to be issued x Par value per share

= 8,130 x 30

= $243,900

Amount to be credited to paid in capital, in excess of par - common stock = Number of share to be issued x (market value of 1 stock - Par value per share)

= 8,130 x (49 - 30)

= 8,130 x 19

= $154,470

Journal

Date	Account Title and Explanation	Debit	Credit
Sept 2	Retained earnings	398,370
	Common stock dividend distributable		243,900
	Paid in capital in excess of par value		154,470
	(To record declaration of stock dividend)
Oct 3	No entry required
Nov 30	Common stock dividend distributable	243,900
	Common stock		243,900
	(To record issue of dividend shares)

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