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On February 5, the directors declare a 2% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $31 per share on February 5 before the stock dividend. 1. Prepare entries to record both the dividend declaration and its distribution.

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Answer:

Feb 5

Dr Stock dividend 35,340

Cr Common Stock dividend distributable 22,800

Cr Paid in capital in excess of par value-Common Stock 12,540

Feb 28

Dr Common Stock dividend distributable 22,800

Cr Common Stock 22,800

Explanation:

TVX Company Journal entry

Feb 5

Dr Stock dividend

(57000*2%*31)

Cr Common Stock dividend distributable 22,800

Cr Paid in capital in excess par value of Common Stock 12,540

(35,340-22,800)

Feb 28

Dr Common Stock dividend distributable 22,800

Cr Common Stock 22,800

Feb. 5

Shares to be issued: 57,000 shares ×2%

= 1,140

Common Stock Dividend Distributable

1,140shares ×$20 per share

=22,800

Based on the information given, the journal entry to depict the information will be:

February 5

Debit Stock dividend 35,340

Credit Common Stock dividend distributable 22,800

Credit Paid in capital in excess of par value-Common Stock 12,540

February 28

Debit Common Stock dividend distributable 22,800

Credit Common Stock 22,800

It should be noted that the stock dividend was calculated as:

= 57000 × 2% × 31

= 35340

Therefore, the credit Paid in capital in excess of par value- common Stock will be:

= 35340 -22,800 = 12,540

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