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18 December, 01:18

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.

b) a debit to Cash for $252,000.

c) a credit to Stock Dividends for $180,000.

d) None of these choices are correct.

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  1. 18 December, 01:22
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    d) None of these choices are correct.

    Explanation:

    The journal entry is shown below:

    Dividends $252,000 ($300,000 * $28 * 3%)

    To Dividends Distributable A/c $180,000 ($300,000 * $20 * 3%)

    To Paid-In Capital in Excess of Par A/c ($300,000 * $8 * 3%)

    (Being the stock dividend is recorded)

    We simply debited the dividend account and credited the dividend distributable account and paid in capital account so that correct posting can be done
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