Chapter 14, Problem 14.3E

(a)

To determine

Stock Dividend: When the company has fewer amounts of cash, it pays dividend to the shareholders in the form of extra shares instead of cash payment. This payment is termed as stock dividend.

Journalizing: It is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the amounts are posted to the relevant ledger accounts.

Accounting rules for journal entries:

• To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
• To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To prepare: The journal entries for stock dividend transactions, if par value of share is $10 and market value is $18.

(b)

To determine

To prepare: The journal entries for stock dividend transactions, if par value of share is $5 and market value is $20