Question

Eastline Corporation had 10,000 shares of $10 par value common stock outstanding when the board of directors declared a stock dividend of 3,000 shares. At the time of the stock dividend, the market value per share was $12. The entry to record this dividend is:
A. Debit Retained Earnings $36,000; credit Common Stock Dividend Distributable $36,000.
B. Debit Retained Earnings $36,000; credit Common Stock Dividend Distributable $30,000; credit Paid-In Capital in Excess of Par Value, Common Stock $6,000.
C. Debit Common Stock Dividend Distributable $36,000; credit Retained Earnings $36,000.
D. Debit Retained Earnings $30,000; credit Common Stock Dividend Distributable $30,000.
E. No entry is needed.

Answer 1

Answer:

B) Debit Retained Earnings $36,000; credit Common Stock Dividend Distributable $30,000; credit Paid-In Capital in Excess of Par Value, Common Stock $6,000.

Explanation:

The journal entry is as follows:

Account                                                                  Debit          Credit

Retained Earnings                                               $36,000

Common Stock Dividend Distributable                                $30,000

Paid in Capital in Excess of Par Value                                    $6,000