Asked by Vaden Mangler on Jun 15, 2024
Verified
The entry to record the transaction of April 10 would include a
A) credit to Retained Earnings for $30,000.
B) credit to Cash for $210,000.
C) credit to Stock Dividends Distributable for $210,000.
D) debit to Stock Dividends Distributable for $300,000.
Stock Dividends Distributable
A portion of a company's retained earnings allocated to be paid out to shareholders in the form of additional stock rather than cash.
Retained Earnings
The portion of net earnings not paid out as dividends, but instead reinvested in the business or used to pay off debt.
Market Value
The ongoing rate at which an asset or service can be sold or acquired in the market.
- Ascertain the correct ledger entries for dividend declarations and their subsequent payments.
Verified Answer
BM
Bipin MainaliJun 16, 2024
Final Answer :
C
Explanation :
The entry to record the transaction of April 10 would include a credit to Stock Dividends Distributable for $210,000. This is because a 10% stock dividend on 300,000 shares results in 30,000 additional shares being issued. The value of these shares is based on the market value on the date of declaration (April 10), which is $7 per share. Therefore, 30,000 shares x $7 = $210,000. This amount is credited to Stock Dividends Distributable, reflecting the company's obligation to distribute the stock dividend.
Learning Objectives
- Ascertain the correct ledger entries for dividend declarations and their subsequent payments.