Austin Motor Works Declared a 5% Stock Dividend in 2016

question 115

Multiple Choice

Austin Motor Works declared a 5% stock dividend in 2016 when the stock was selling for $18 per share.There were 2,000,000 shares outstanding at the time of the dividend declaration.The controller recorded the distribution at par value ($1 per share) resulting in a debit to retained earnings and a credit to common stock for $100,000.Upon review in early 2017 when the 2016 books were still open,the CFO made which of the following correcting entries?

• A)He made no entry because the controller was correct.
• B) APIC-Common Stock 1,700,000
• C) Common Stock 1,700,000
• D) Common Stock 1,700,000

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Definitions:

Union-Negotiated

Agreements or contracts about wages, working conditions, and other employment terms that are discussed and decided upon through collective bargaining by unions on behalf of employees.

Retirement Account

A financial account designed specifically for savings for retirement, often offering tax advantages.

National Labor Relations Board

A federal agency established in the United States to enforce labor laws in relation to collective bargaining and unfair labor practices.

Unfair Labor Practices

Actions by employers or unions that violate the rights of employees as defined by labor laws or labor agreements.