Answer:
The following entry is made on the declaration date:
Retained Earnings ( 20,000 x $10) $200,000 Debit
Common Stock Dividend Distributable $40,000 Credit
Paid in Capital in Excess of Par $160,000 Credit
At the moment of been distributed the additional shares to the stockholders the company register the following entry:
Common Stock Dividend Distributable $40.000 Debit
Common Stock $40.000 Credit
Explanation:
When the company declares a stock dividend it does not involve cash, it means that each stockholder will get an additional percentage of shares.
As the total value of stock it's the same, then the value per share decrease related to the price before the stock dividend because there are more shares outstanding.
On December 31, 2018, the company's board of directors declares a 20 percent stock dividend.
As the total shares outstanding are 100,000 , the stock dividend will be 20,000 more shares.
The following entry is made on the declaration date:
Retained Earnings ( 20,000 x $10) $200.000 Debit
Common Stock Dividend Distributable $40.000 Credit
Paid in Capital in Excess of Par $160.000 Credit
At the moment of been distributed the additional shares to the stockholders the company register the following entry:
Common Stock Dividend Distributable $40.000 Debit
Common Stock $40.000 Credit
