Answer:
The Journal entries are as follows:
(1) On July 1,
Retained earnings A/c [1,166 × $14] Dr. $16,324
To common stock distributable [1,166 × $2] $2,332
To paid-in-capital in excess of par- common stock $13,992
(To record declaration of stock dividend)
(2) On July 20,
common stock distributable A/c Dr. $2,332
To common stock $2,332
(To record distribution of the stock dividend)
Workings:
Common stock outstanding = 10,600 shares
Stock dividend declared = 11%
No. of common stock declared as dividend = 10,600 × 11%
= 1,166 shares
a. Jul-01
Dr Retained earnings $16,324
Cr Common stock dividend distributable $2,332
Cr Paid - in - capital in excess of par - common stock $13,992
b. Jul-20
Dr Common stock dividend distributable $2,332
Cr Common stock $2,332
Preparation of journal entries for (a) declaration and (b) distribution of the stock dividend.
a. Jul-01
Dr Retained earnings $16,324
(10,600 ×11% × $14)
Cr Common stock dividend distributable $2,332
(10,600 ×11% ×$2)
Cr Paid - in - capital in excess of par - common stock $13,992
($16,324-$2,332)
(To record declaration of Dividend)
b. Jul-20
Dr Common stock dividend distributable $2,332
(10,600 ×11% ×$2)
Cr Common stock $2,332
(To record distribution of the stock dividend)
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