On December 1, 2014, Arbor Company Had 20,000 Shares of $1

question 43

Multiple Choice

On December 1, 2014, Arbor Company had 20,000 shares of $1 par value common stock issued and outstanding. The next day they distributed a 50% stock dividend. The market value of the stock on that date was $9 per share. Please provide the journal entry for the transaction. Which of the following is the correct journal entry to record this transaction?

• A) Debit Retained earnings $90,000 and credit Cash $90,000.
• B) Debit Retained earnings $90,000, credit Common stock $10,000 and credit Paid-in capital $80,000.
• C) Debit Common stock $10,000 and credit Retained earnings $10,000.
• D) Debit Retained earnings $10,000 and credit Common stock $10,000.

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Definitions:

Cost Flow Assumption

An accounting assumption used to value and manage inventory by determining the cost of goods sold and ending inventory.

Specific Identification

A method of inventory costing where each item in inventory is uniquely identified, allowing for the precise tracking of cost of goods sold and inventory levels.

Cost Flow

The manner in which costs move through a company's inventory accounts to eventually become cost of goods sold.

FIFO

An inventory valuation method which assumes that the first goods purchased or produced are also the first ones sold, also known as "First In, First Out."