Question

White Corp. has outstanding 40,000 shares of $5 par value common stock. At year-end, the company...

White Corp. has outstanding 40,000 shares of $5 par value common stock. At year-end, the company declares and issues a 6% common stock dividend when the market price of the stock is $22 per share. What will be the entry to retained earnings as a result of this stock dividend?

a. 40,800 credit

b. 12,000 debt

c. 40,800 debit

d. 52,800 debit

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Answer #1
Shares to be issued in stock dividend = Shares outstanding * Stock dividend % = 40000 * 6% 2400
Journal entry for the given transaction is :
Dr. Cr.
Retained earnings ( 2400 * 22 ) 52800
   Common stock ( 2400 * 5 ) 12000
   Paid in capital in excess of par 40800
So, the answer is Option d [ 52,800 debit ]
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