Question

Stock dividends & stock splits

The stockholders’ equity accounts of GoSmart Company have the following balances on December 31, 2019.

Common stock, $10 par, 100,000 shares issued and outstanding $1,000,000

Paid-in capital in excess of par—common stock $400,000

Retained earnings $1,800,000

Shares of GoSmart Company stock are currently selling on the National Stock Exchange at $20.

Required:

Prepare the appropriate journal entries for each of the following cases.

(a) A stock dividend of 5% is declared and issued.

(b) A stock dividend of 100% is declared and issued.

(c) A 2-for-1 stock split is declared and issued.

Answer 1

Journal entries

No	General Journal	Debit	Credit
a	Stock dividend (100000*5%*20)	100000
	Common Stock dividend distributable		50000
	Paid in capital in excess of par-Common Stock		50000
	Common Stock dividend distributable	50000
	Common Stock		50000
b	Stock dividend	1000000
	Common Stock dividend distributable		1000000
	Common Stock dividend distributable	1000000
	Common Stock		1000000
c	No Entry
	No entry