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ExampleA company has 200,000 outstanding shares of common stock of $10 par value. It declares 10% stock dividend. The market price per share of common stock was $15 on the date of declaration.Record the declaration and payment of the stock dividend using journal entries.SolutionJournal entry on the date of declaration:Retained Earnings300,000Stock Dividends Distributable300,000Journal entry on the date of distribution:Stock Dividends Distributable300,000Common Stock200,000Addition Paid-In Capital100,000o illustrate, let's assume a corporation has 2,000 shares of common stock outstanding when it declares a 5% stock dividend. This means that 100 (2,000 shares times 5%) new shares of stock will be issued to existing stockholders. Assuming the stock has a par value of $0.10 per share and a market value of $12 per share on the declaration date, the following entry is made on the declaration date:To illustrate, let's assume a corporation has 2,000 shares of common stock outstanding when it declares a 5% stock dividend. This means that 100 (2,000 shares times 5%) new shares of stock will be issued to existing stockholders. Assuming the stock has a par value of $0.10 per share and a market value of $12 per share on the declaration date, the following entry is made on the declaration date:When the 100 shares are distributed to the stockholders, the following journal entry is made:Large stock dividend. A stock dividend is considered to be large if the new shares being issued are?more than?20-25% of the total value of shares outstanding prior to the stock dividend.On the declaration date of a large stock dividend, a journal entry is made to transfer the?par value?of the shares being issued?from retained earnings to the paid-in capital section of stockholders' equity.To illustrate, let's assume a corporation has 2,000 shares of common stock outstanding when it declares a 50% stock dividend. This means that 1,000 new shares of stock will be issued to existing stockholders. The stock has a par value of $0.10 per share and the stock has a market value of $12 per share on the declaration date. The following entry should be made on the declaration date:When the 1,000 shares are distributed to the stockholders, the following journal entry should be made: ................
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