A corporation had stockholders' equity on January 1 as follows: Common Stock, $5 par value, 1,000,000 shares authorized, 500,000 shares issued; Contributed Capital in Excess of Par Value, Common Stock, $1,000,000; Retained Earnings, $3,000,000. Prepare journal entries to record the following transactions: Feb 15: The board of directors declared a 5% stock divident to stockholders of records on March 1 to be issued on March 20. The stock was trading at $6 per share prior to the dividend. Mar 1. The date of record. March 20. Issued the stock dividend

A corporation had stockholders' equity on January 1 as follows: Common Stock, $5 par value, 1,000,000 shares authorized, 500,000 shares issued; Contributed Capital in Excess of Par Value, Common Stock, $1,000,000; Retained Earnings, $3,000,000. Prepare journal entries to record the following transactions: Feb 15: The board of directors declared a 5% stock divident to stockholders of records on March 1 to be issued on March 20. The stock was trading at $6 per share prior to the dividend. Mar 1. The date of record. March 20. Issued the stock dividend

Number of shares to be issued = (500,000 × 5%) = 25,000 shares

Amount to be Debited to Retained Earnings = 25,000 × $6 = $150,000

February 15                Retained Earnings                              $150,000

                                          Stock Dividends Distributable                             $125,000

                                          Paid-in Capital in excess of Par                             $25,000           

March 1                      No Entry Required                

March 20                    Stock Dividends Distributable           $125,000

                                    Common Stock                                                           $125,000