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Q9SE_1

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Horngren'S Financial And Managerial Accounting
Found in: Page 709

Short Answer

Question: Journalizing a small stock dividend

Element Water Sports has 13,000 shares of $1 par value common stock outstanding.

Element distributes a 5% stock dividend when the market value of its stock is $15 per share.

Requirements

1. Journalize Element’s declaration of the stock dividend on August 15 and distribution on August 31.

Answer

August15- stock dividend will be debited by $9,750, common stock dividend distribution is credited by $650 and Paid- in capital will be credited by $9,100.

August 31- Common Stock Dividend Distributable will be debited by $650 and Common Stock—$1 Par Value will be credited by $650.

See the step by step solution

Step by Step Solution

Step 1: Calculation of stock dividend

Step 2: Journal entry of stock dividend

Date

Transaction

Debit

Credit

August 15

Stock dividend (650*$15)

$9,750

Common stock Dividend distribution (650* $1)

$650

Paid- in capital (650* $14)

$9,100

To record dividend declared

August 31

Common Stock Dividend Distributable

$650

Common Stock—$1 Par Value

$650

To record dividend distributed

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