Exercise 6: Stock Dividends Rather than paying dividends in cash, a company may elect to issue additional shares to its current shareholders in the form of a stock dividend. Review the following completed example carefully: On June 20 ∘
, the Board of Directors of Commerce Inc. declares a 4% stock dividend on its 50,000 outstanding common shares. The date of record is June 30 th and the dividend will be distributed on July 14 4. . The par value of the stock is $10 per share and the market value on July 14 4
is $16 per share. To record the entries for a stock dividend, first complete these steps. - Calculate the number of shares to be issued. 0.04×50,000 shares =2,000 shares - Next, calculate dollar value of the stock dividend using the market value. 2000 shares x$16=$32,000 NOTE: The above entry is made when the shares are distributed on July 14 97
. Unlike cash dividends, there is no entry necessary at the date of declaration as there is no liability incurred on that date. This is because liabilities are a claim on assets and stock dividends are simply a transfer from Retained Earnings to Common Stock. Now, use the previous example as a guide to record the following stock dividend in the t-accts below: On May 15 th , the Board of Directors of Traymont inc. declares a 5% stock dividend on its 10,000 outstanding common shares. The date of record is May 31 91
and the dividend will be distributed on May 15 th. . The par value of the stock is $2 per share and the market value on May 15 th is $7 per share. To record the entries for a stock dividend, first complete these steps. - Calculate the number of shares to be issued. - Next, calculate dollar value of the stock dividend using the market value. Now, use the previous example as a guide to record the following stock dividend in the t-accts below: On May 15 th , the Board of Directors of Traymont Inc. declares a 5% stock dividend on its 10,000 outstanding common shares. The date of record is May 31 st and the dividend will be distributed on May 15 th . The par value of the stock is $2 per share and the market value on May 15 th is $7 per share. To record the entries for a stock dividend, first complete these steps. - Calculate the number of shares to be issued. - Next, calculate dollar value of the stock dividend using the market value.