A Corporation Had 40,000 Shares of $10 Par Value Common

question 32

Multiple Choice

A corporation had 40,000 shares of $10 par value common stock outstanding on August 1.Later that day,the board of directors declared a 9% stock dividend when the market value of each share was $72.The entry to record this dividend is:

• A) \[\begin{array} { | c | r | r | }
• \hline \text { Common Stock Dividend Distributable } & 259,200 & \\
• \hline \text { Retained Earnings } & & 259,200 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | r | r | }
• \hline \text { Retained Earnings } & 259,200 & \\
• \hline \text { Common Stock Dividend Distributable } & & 259,200 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | r | r | }
• \hline \text { Retaired Earnings } & 259,200 & \\
• \hline \text { Common Stock Dividend Distributable } & & \mathbf { 3 6 , 0 0 0 } \\
• \hline \text { Paid-In Capital in Excess of Par Value } & & \\
• \text { Common Stock } & & 223,200 \\
• \hline
• \end{array}\]
• D) \(\begin{array}{|l|r|r|}
• \hline \text { Retained Earnings } & 36,000 & \\
• \hline \text { Common Stock Dividend Distributable } & & 36,000 \\
• \hline
• \end{array}\)
• E) No entry is made until the stock is issued

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Definitions:

Debit Side

The left side of an accounting ledger where debits are recorded, typically indicating increases in assets or expenses and decreases in liabilities or equity.

Left Side

In accounting, this refers to the debit side of a double-entry bookkeeping system, indicating increases in assets or expenses and decreases in liabilities or equity.

Debit Side

The left side of an accounting ledger where increases in assets and expenses or decreases in liabilities and equity are recorded.

Normal Balance

The side of an account (debit or credit) where increases in the account are recorded, reflecting the account's usual positive balance.