the board of directors declares 15% stock dividend on10000 outstanding shares of$20 per common stock. Thee current market value is $25 per share. how should I journalize this entry?
To journalize the entry for the declaration of a 15% stock dividend, you would follow these steps:
1. Determine the number of shares to be issued as a dividend. In this case, it is 15% of the outstanding shares, which is 15% of 10,000 shares. So, calculate 15% of 10,000: 0.15 x 10,000 = 1,500 shares.
2. Calculate the par value of the stock dividend. Since the stock dividend is declared on $20 per common stock, the par value per share is $20.
3. Calculate the total par value of the stock dividend. Multiply the par value per share ($20) by the number of shares to be issued (1,500): $20 x 1,500 = $30,000.
4. Journalize the entry. The entry will depend on your specific chart of accounts, but generally, the entry will involve two accounts: "Common Stock Dividend Distributable" and "Paid-in Capital in Excess of Par Value - Common Stock."
The journal entry will be:
Date: [Date of declaration]
Common Stock Dividend Distributable $30,000
Paid-in Capital in Excess of Par Value - Common Stock $30,000
This entry represents the distribution of 1,500 additional shares to the stockholders as a 15% stock dividend, with a total par value of $30,000.