Question

Odessa Corporation had 20,000 shares of $2 par value common stock outstanding on July 1. On that day, the board of directors declared a 10% stock dividend when the market value of each share was $9. The stock dividend is to be distributed on July 20 to stockholders of record on July 10. The entry to record the dividend declaration is:

No entry is made until the stock is issued.

Debit retained Earnings $18,000; credit Common Stock Dividends Distributable $4,000; credit Paid-In Capital in Excess of Par Value, Common Stock $14,000.

Debit Retained Earnings $18,000; credit Common Stock $18,000.

Debit Retained Earnings $18,000; credit Common Stock $4,000; credit Paid-In Capital in Excess of Par Value, Common Stock $14,000.

Debit Retained Earnings $18,000; credit Common Stock Dividend Distributable $18,000.

Answer 1

Dividend declaration

Date	account and explanation	Debit	Credit
	Stock dividend (20000*10%*9)	18000
	Common Stock dividend distributable (2000*2)		4000
	Paid in capital in excess of par value-Common Stock		14000

So answer is b) Debit retained Earnings $18,000; credit Common Stock Dividends Distributable $4,000; credit Paid-In Capital in Excess of Par Value, Common Stock $14,000.