JournaldrillSmall stock dividend
A journal entry exercise from Journaldrill. Solve it with an account picker and debit and credit fields in your browser, and it is checked the moment you submit.
The task
Orchard Lane Foods Inc. has 80,000 shares of $2 par value common stock outstanding. The board declares a 10% stock dividend when the market price is $15 per share. Record the declaration.
What this exercise teaches
New shares are 80,000 x 10% = 8,000, valued at 8,000 x $15 = $120,000. Par of 8,000 x $2 = $16,000 goes to the distributable account and the remaining $104,000 to paid-in capital in excess of par.
A hint if you get stuck
A small stock dividend moves market value out of retained earnings, split between par value to be issued and the excess over par.
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