Question

Eastline Corporation had 17,500 shares of $5 par value common stock outstanding when the board of directors declared a stock dividend of 6,125 shares. At the time of the stock dividend, the market value per share was $17. The entry to record this dividend is:

Answer 1

The journal entry to record the declaration of a stock dividend is by debiting the retained earnings and crediting the common stock dividend with equal amounts of $30,625.

What are dividends?

Dividends are the amount allocated to the investors by the company with respect to the shareholdings held by them.

The journal entry for recognizing the transaction is as follows:

Particulars                                         Debit         Credit

Retained earnings (6,125 X $5)         30,625

   Common stock dividends                               30,625

(To record the declaration of dividends

on common stock)

Therefore, the journal entry is explained and recorded as above.

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