Question

On December 1, 2015, Arther Company had 200,000 shares of $1 par value common stock issued...

On December 1, 2015, Arther Company had 200,000 shares of $1 par value common stock issued and outstanding. The day they declared and distributed a 50% stock dividend. The market value of the stock on that date was $9 per share. Provide the journal entry for the transaction.

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Answer #1

Solution:

Outstanding shares = 200000

Par value per share = $1

Dividend declared and distributed = 50%

Dividend per share = $1*50% = $0.50

Total dividend distributed = 200000*0.50 = $100,000

Journal Entries - Arther Company
Particular Debit Credit
Declaration of dividend:
Retained Earnings Dr $100,000.00
         To Dividend Payable A/c $100,000.00
(Being dividend declared at $0.50 per share)
Payment of dividend:
Dividend Payable A/c Dr $100,000.00
         To Bank A/c $100,000.00
(Being dividend payment made)
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