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On January 1, Brunhilde Corporation had 240,000 common shares issued. On March 17, the company declared a 5% stock dividend to be distributed on March 30. The market value of the shares was $9 on March 17 and $12 on March 30.
-The entry to record the transaction of March 17 would include a
A)credit to Retained Earnings for $12,000.
B)credit to Cash for $108,000.
C)credit to Common Stock Dividends Distributable for $108,000.
D)debit to Common Stock Dividends Distributable for $144,000.

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On January 1, Brunhilde Corporation had 240,000 common shares issued. On March 17, the company declared a 5% stock dividend to be distributed on March 30. The market value of the shares was $9 on March 17 and $12 on March 30.
-The entry to record the transaction of March 17 would include a
A)credit to Retained Earnings for $12,000.
B)credit to Cash for $108,000.
C)credit to Common Stock Dividends Distributable for $108,000.
D)debit to Common Stock Dividends Distributable for $144,000.

Quizplus · Accepted Answer

A stock dividend is a distribution of additional shares of stock to current shareholders. Therefore, a credit enters into a common stock dividends distributable account, which indicates the amount of shares to be distributed to each shareholder. The credit is for the fair market value of the shares on the declaration date, which was $9 per share. Therefore, the credit would be for $108,000 ($9 x 240,000 shares). Retained earnings and cash are not affected by this transaction, so options A and B are incorrect. Finally, choice D is incorrect as it suggests a debit, but a stock dividend does not require a debit.

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