Answered: es a 30% common stock dividend. Which…

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es a 30% common stock dividend. Which of the following adjustments should be made when recording the stock divic

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A company whose stock is trading at $10 per share has 1,000 shares of $1 par common stock outstanding when the board of directors
declares a 30% common stock dividend. Which of the following adjustments should be made when recording the stock dividend?
O Retained earnings is debited for $300.
O Common stock is debited for $3,000.
O Additional paid-in capital is credited for $2,700.
O Treasury stock is debited for $300.

Expert Solution

Step 1

Stock dividend is paid in the form the common stock out of the retained earnings.

Stock dividend is paid the market price of share. Excess value is credited to the additional paid-in capital account.

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