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Luke Enterprises has 300,000 shares of $20 par common stock outstanding. On January 19, Luke Enterprises declared a 3% stock dividend. The market price of the stock on January 19 was $28 per share. The journal entry to record the stock dividend would include a.a debit to Stock Dividends Distributable for $252,000.

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Answer:

On the day the the dividends are declared, the following journal entries must be made:

  • Dr Retained Earnings account 252,000
  • Cr Dividends Payable account 252,000

When the dividends are paid, the following journal entries should be made:

  • Dr Dividends Payable account 252,000
  • Cr Cash account 252,000

300,000 shares x $28 per share x 3% = $252,000

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