Rick Co Had 30 Million Shares of $1 Par Common Stock

question 18

Multiple Choice

Rick Co. had 30 million shares of $1 par common stock outstanding at January 1, 2018. In October 2018, 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:

• A) Debit retained earnings for $18 million.
• B) Credit paid-in capital-excess of par for $18 million.
• C) Credit common stock for $18 million.
• D) None of these answer choices are correct

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Definitions:

Underapplied Overhead

A situation where the allocated manufacturing overhead cost is less than the actual overhead cost incurred.

Direct Materials Cost

The cost associated with the raw materials that are directly used in the production of a product.

Direct Labor

Workers actively engaged in manufacturing products or providing services, whose labor directly contributes to output.

Finished Goods

Products that have completed the manufacturing process but have not yet been sold or distributed to the end customer.