Rick Co. had 30 million shares of $1 par common stock outstanding at January 1, 2021. In October 2021, Rick Co.'s Board of Directors declared and distributed a 1% common stock dividend when the market value of its common stock was $60 per share. In recording this transaction, Rick would:

Question

Javon Mclean

Business

17 October, 03:09

Rick Co. had 30 million shares of $1 par common stock outstanding at January 1, 2021. In October 2021, Rick Co.'s Board of Directors declared and distributed a 1% common stock dividend when the market value of its common stock was $60 per share. In recording this transaction, Rick would:

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Maliyah White · Answer 1

The journal entry is as follows:

Retained earnings A/c Dr. $18 million

To common stock $0.30 million

To capital paid in excess A/c $17.70 million

(To record the stock dividend issued at 1%)

Working notes:

Shares issued = 1% of 30 million

= 0.30 million

Retained earnings:

= 0.30 million * $60 per share

= $18 million

Common stock:

= 0.30 million * $1 par value

= $0.30 million

Capital paid in excess:

= Retained earnings - Common stock

= $18 million - $0.30 million

= $17.7 million