Pickens Corporation declares and issues a 20% stock dividend. On the date of declaration, the stock is...
- Pickens Corporation declares and issues a 20% stock dividend. On the date of declaration, the stock is selling for $130 per share. Assuming that there were 50,000 shares outstanding with a $10 par value, prepare the journal entry on the date of declaration to record Pickens stock dividend.
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Debit |
Credit |
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Homework Answers
The journal entry on the date of declaration will be:
| Debit ($) | Credit($) | |
| Retained earnings | 1,300,000 | |
| Common stock dividend to be distributed | 100,000 | |
| Additional paid-in capital-Common stock | 1,200,000 | |
NEW common shares being issued= 50,000*20%= 10,000 shares
Retained earnings= 10,000 shares* market value of the stock on declaration date
=10,000*$130
=$1,300,000
Common stock dividend to be distributed= 10,000 shares* par value
=10,000*$10
=$100,000
Additional paid-in capital from stock dividend= Retained earnings- common stock distributable
=$1,300,000-$100,000
=$1,200,000
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