ACCT 201 Principles of Financial Accounting
Practice Exam - Chapter 11
Reporting & Analyzing Equity
Dr. Fred Barbee

Solution to Short-Problem #3

Solution

Short Problem #3

A corporation has 200,000 shares of $10 par value common stock outstanding. The following selected transactions related to the company's stock took place during the current year:

Apr. 15 Declared a 40% stock dividend to stockholders of record on May 1, to be issued May 10. The current market value is $15 per common share.

May 10 Issued the common stock dividend.

Solution

Journal Entry For April 15
Retained Earnings (200,000 x 40% x $10 800,000

Common Stock Dividend Distributable
800,000

**Journal Entry For April 15**
Retained Earnings (200,000 x 40% x $10	800,000
Common Stock Dividend Distributable		800,000

Journal Entry For May 1
NO ENTRY REQUIRED

**Journal Entry For May 1**
NO ENTRY REQUIRED

Journal Entry For May 10
Common Stock Dividends Distributable 800,000

Common Stock
800,000

Apr.	15	Declared a 40% stock dividend to stockholders of record on May 1, to be issued May 10. The current market value is $15 per common share.
May	10	Issued the common stock dividend.

Common Stock Dividends Distributable	800,000
Common Stock		800,000