Question

Nike has 700,000 authorized shares of $2 par value common stock. The company issued 450,000 shares and has additional paid-in capital-in-excess of par value of $1,600,000. The company does not have any treasury stock. North Bend Co. declared a 15 percent stock dividend when the stock was selling for $10 per share. By how much should the Additional Paid-in-Capital account increase as a result of the stock dividend:

Answer 1

The Journal Entry to record dividend will be ;

Particulars	Debit	Credit
Retained Earnings (450,000 x 15% x $10)	$675000
Common stock dividend distributable        (450,000 x 15% x $2)		$135000
Paid in capital in excess of par value,        common stock        (450,000 x 15% x $8)		$540,000
(For recording Declaration of 15% stock dividend)

So additional paid in capital will increase by $540,000 as result of stock dividend