Question

To reduce its stock price, Shriver Food Systems, Inc., declared and issued a 75 percent stock dividend. The company has 710,000 shares authorized and 110,000 shares outstanding. The par value of the stock is $1 per share and the market value is $100 per share. Prepare the journal entry to record this large stock dividend. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Answer:

Dividend $82,500 (debit)

Cash $82,500 (credit)

Explanation:

Dividends are distributed to the shares outstanding at declaration date instead of authorized shares.

Dividend = 110,000 shares outstanding × $1× 0.75

               = $82,500

Note : Value used is based on the par value of shares

Dividend $82,500 (debit)

Cash $82,500 (credit)