Question

Casey Company issued a 5% stock dividend on its $10 par value common stock. At the time of the stock dividend, Casey Company had 5,000 shares of common stock issued and outstanding and the common stock had a market value of $15. Which of the following is the correct general journal entry necessary to record the stock dividend? Debit 3,750 Credit Retained Earnings Common Stock, $10 Par Value Paid-in Capital in Excess of Par-Common Retained Earnings Common Stock, $10 Par Value a. 2,500 1,750 b. 2,500 2,500 2,500 Dividends C. 2,500 Cash Cash Common Stock, $10 Par Value Paid-in Capital in Excess of Par-Common 3,750 d. 2,500 1,750 OOOO

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

1 Answer 2 The correct answer is Debit Credit Retained Earnings 4 A 3750 Common Stock $ 10 Par Value 2500 5 Paid in Capital in Excess of Par- Common 6 1750 7 8 Explanation When ever the stock dividend is declared, it is declared out of retained earnings, so retained earnings are to be debited and common stock and paid in capital in excess of Par- common stock has to be credited. Since market value of the share is more than the par value, so excess amount has to be credited in paid in capital in excess of par 9 10 11