Question

Gonzales Company declared and distributed a 10% stock dividend when it had 800,000 shares of $1 par value common stock outstanding. The market price per share of common stock was $60 per share when the dividend was declared. The journal entry to record the stock dividend would include a credit to:__________.
a. Common Stock $800,000.
b. Stock Dividends $1,200,000.
c. Additional Paid-in Capital -Common $4.720,000.
d. Retained Earnings $800,000.

Answer 1

Answer: C. Additional Paid-in Capital -Common $4.720,000.

Explanation:

Based on the information given in the question, the journal entry to record the stock dividend would go thus:

Debit: Retained earnings = 80000 × $60 = $4,800,000

Credit: Common stock = 80000 × $1 = $80000

Credit: Additional paid in capital- Common stock = 80,000 × $59 = $4,720,000

(To record share dividend)

Therefore, the journal entry to record the stock dividend would include a credit to Additional Paid-in Capital -Common $4.720,000