Question

Epic Inc. has 10,600 shares of $2 par value common stock outstanding. Epic declares a 11% stock dividend on July 1 when the stock’s market value is $14 per share. The stock dividend is distributed on July 20. Prepare journal entries for (a) declaration and (b) distribution of the stock dividend.

Answer 1

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