Answer:
Journal entries are given in the explanation section:
Explanation:
1. Dividend Declaration -
February 05 - Retained Earnings Debit $480,000
(60,000 x 20% stock dividend) x $40[tex]^{*}[/tex]
Stock dividend - common Credit $120,000
(60,000 shares x 20% stock dividend) x $10[tex]^{**}[/tex]
Additional paid-in capital in excess of common stock dividend Credit $360,000
$(480,000 - 120,000) = $360,000
Note: * As $40 is the market value, stock dividend should be valued at the time of market rate.
** All the shares are issued $10 par value.
2. Stock dividend distribution -
February 28 - Stock dividend distributable - common Debit $120,000
Common stock, $10 par value Credit $120,000
When dividends are distributed among the shareholders', stock dividend becomes debit from credit at the time of declaration.
Answer:
A dividend is the part of profit which is distributed by the company to its shareholders . The declaration of the dividend takes place when the company actually decides to pay the dividend . The dividend is distributed as a fixed amount per share to the shareholders .
Explanation:
1 . Dividend declaration [tex]\begin{aligned}\text{Retained Earnings}&=\text{Authorized Shares}\times\text{Stock Dividend}\times\text{Market Price per Share}\\&=\$60,000\times20\%\times\$40\\&=\$480,000 \end{aligned}[/tex][tex]\begin{aligned}\text{stock dividend}&=\text{Authorized Shares}\times\text{Stock Dividend}\times\text{par value of Share}\\&=\$60,000\times20\%\times\$10\\&=\$120,000 \end{aligned}[/tex]
[tex]\begin{aligned}\text{Additional Paid up Capital}&=\text{Retained Earnings}-\text{Stock Dividend}\\&=\$480,000-\$120,000\\&=\$360,000 \end{aligned}[/tex]
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