12. Luke Enterprises has 300,000 shares of $20 par common stock outstanding. On January 19, Luke Enterprises declared a 3% stock dividend. The market price of the stock on January 19 was $28 per share. The journal entry to record the stock dividend would include a.a credit to Stock Dividends for $180,000. b.a debit to Stock Dividends Distributable for $252,000. C.a debit to Cash for $252,000. d.None of these choices are correct. wwwwm
12. Luke Enterprises has 300,000 shares of $20 par common stock outstanding. On January 19, Luke Enterprises declared a 3% stock dividend. The market price of the stock on January 19 was $28 per share. The journal entry to record the stock dividend would include a.a credit to Stock Dividends for $180,000. b.a debit to Stock Dividends Distributable for $252,000. C.a debit to Cash for $252,000. d.None of these choices are correct. wwwwm
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter11: Stockholders' Equity
Section: Chapter Questions
Problem 11.13AMCP
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![### Stock Dividend Accounting Entry
**Problem 12:**
Luke Enterprises has 300,000 shares of $20 par common stock outstanding. On January 19, Luke Enterprises declared a 3% stock dividend. The market price of the stock on January 19 was $28 per share. The journal entry to record the stock dividend would include:
- **a.** a credit to Stock Dividends for $180,000.
- **b.** a debit to Stock Dividends Distributable for $252,000.
- **c.** a debit to Cash for $252,000.
- **d.** None of these choices are correct.
**Solution Explanation:**
To calculate the value of the stock dividend declared, we use the formula:
\[ \text{Number of shares} \times \text{Market Price} \times \text{Dividend Percentage} \]
Applying the given values:
\[ 300,000 \text{ shares} \times 0.03 \times 28 = 252,000 \]
Thus, the correct entry would be:
**b.** a debit to Stock Dividends Distributable for $252,000.
This indicates that the correct journal entry for the stock dividend would be a debit to Stock Dividends Distributable for $252,000.
**Note:**
There is a miscalculation highlighted in the image as \(300,000 \times 28 \times 0.03 = 252,000\), but it might also be mistakenly written as \( 300,000 \times 28.03 = 252,000 \).
In conclusion, the journal entry should properly reflect the debit to Stock Dividends Distributable for $252,000.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe3ab2835-e63c-462d-897e-c9721400fd30%2F9895e959-fff2-4a7f-abb2-9c5bfd8ef3d3%2Fgrrrmk.png&w=3840&q=75)
Transcribed Image Text:### Stock Dividend Accounting Entry
**Problem 12:**
Luke Enterprises has 300,000 shares of $20 par common stock outstanding. On January 19, Luke Enterprises declared a 3% stock dividend. The market price of the stock on January 19 was $28 per share. The journal entry to record the stock dividend would include:
- **a.** a credit to Stock Dividends for $180,000.
- **b.** a debit to Stock Dividends Distributable for $252,000.
- **c.** a debit to Cash for $252,000.
- **d.** None of these choices are correct.
**Solution Explanation:**
To calculate the value of the stock dividend declared, we use the formula:
\[ \text{Number of shares} \times \text{Market Price} \times \text{Dividend Percentage} \]
Applying the given values:
\[ 300,000 \text{ shares} \times 0.03 \times 28 = 252,000 \]
Thus, the correct entry would be:
**b.** a debit to Stock Dividends Distributable for $252,000.
This indicates that the correct journal entry for the stock dividend would be a debit to Stock Dividends Distributable for $252,000.
**Note:**
There is a miscalculation highlighted in the image as \(300,000 \times 28 \times 0.03 = 252,000\), but it might also be mistakenly written as \( 300,000 \times 28.03 = 252,000 \).
In conclusion, the journal entry should properly reflect the debit to Stock Dividends Distributable for $252,000.
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