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On August 1, 2018, Towson Corp., declared a 5% stock dividend on its common stock when...

On August 1, 2018, Towson Corp., declared a 5% stock dividend on its common stock when the market value of the common stock was $16 per share. The balance in the common stock account, before the stock dividend was declared, was $1,200,000. The par value of all common stock is $10. What is the total dollar amount credited to additional paid in capital - common stock on August 1, 2018?

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Answer #1

Answer :- Common Stock = $60,000

Additional paid in capital-common stock = $36,000

Before stock dividend is declared, there is 120,000 stocks outstanding ( $1,200,000 / $10 )

Stocks to be distributed as dividend = 120,000 * 5% = 6,000 stocks

Stock dividend is to be recorded at market value.

we have the entries :-

Retained Earnings a/c Dr $96,000

To Common Stock Dividend Distributable A/c $60,000

To Additional Paid-in Capital-Common Stock A/c $36,000

So the dollar amount credited to common stock is $60,000

the dollar amount credited to additional paid in capital-common stock is $36,000.

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