Question

1. On January 1, 2014, Epson Corporation had $600,000 of $10 par value common stock outstanding that was issued at par and retained earnings of $150,000. The company issued 20,000 shares of common stock at $12 per share on July 1. On December 15, the board of directors declared a 20% stock dividend to stockholders of record on December 31, 2014, payable on January 15, 2015. The market value of Epson Corporation stock was $15 per share on December 15 and $16 per share on December 31. Net income for 2014 was $190,000.

Instructions: Journalize the entries associated with the dividends.

Answer 1

Stock dividend is where the distribution of profits is in the form of dividend paid
Record journal entry for stock dividend declared
Date	General Journal	Debit	Credit
15-Dec	Retained earnings (80,000*15*20%)	$240,000
	Common stock distributable (80,000*20%*10)		$160,000
	Additional paid in capital - excess of par (240,000-160,000)		$80,000
	(To record stock dividend declared)
Record journal entry for stock dividend distributed
Date	General Journal	Debit	Credit
15-Jan	Common stock distributable	$160,000
	Common stock		$160,000
	(To record stock dividend declared)