Question

belkin incorporated has 109,000 shares of $3 par value common stock outstanding. belkin declares a 49% stock dividend on march 2 when the stocks market value is $81 per share. prepare the journal entry for declaration of the stock dividend. view transaction list journal entry worksheet 1 record the declaration of a 49% stock dividend. note: enter debits before credits.

Explanation:

Step1: Calculate the number of new shares

Number of new shares = Outstanding shares × Stock - dividend percentage
Number of new shares = \(109000\times49\%=109000\times0.49 = 53410\)

Step2: Calculate the amount to be transferred to Common - Stock Dividend Distributable (at par value)

Amount at par value = Number of new shares × Par value per share
Amount at par value=\(53410\times3=\$160230\)

Step3: Calculate the amount to be transferred to Paid - in Capital in Excess of Par (at market value - par value)

Amount at market value=\(53410\times81=\$4326210\)
Amount to Paid - in Capital in Excess of Par=\(4326210 - 160230=\$4165980\)

Step4: Journal entry

When a stock dividend is declared, we debit Stock Dividends (for the market value of the new shares), credit Common - Stock Dividend Distributable (for the par value of the new shares), and credit Paid - in Capital in Excess of Par (for the excess of market value over par value)

Account Title	Debit	Credit
Common - Stock Dividend Distributable		\(160230\)
Paid - in Capital in Excess of Par		\(4165980\)

Answer:

Account Title	Debit	Credit
Common - Stock Dividend Distributable		\(160230\)
Paid - in Capital in Excess of Par		\(4165980\)