Green Day Corporation has outstanding 400,000 shares of $10 par value common stock. The corporation declares a 100% stock dividend when the fair value of the stock is $65 per share. Prepare the journal entries for both the date of declaration and the date of distribution

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Business

Alani Ingram

3 August, 01:57

Green Day Corporation has outstanding 400,000 shares of $10 par value common stock. The corporation declares a 100% stock dividend when the fair value of the stock is $65 per share. Prepare the journal entries for both the date of declaration and the date of distribution

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Peter Sullivan · Answer 1

Date of Declaration

Dividend $400000 (debit)

Shareholders for Dividends $400000 (credit)

Date of Distribution

Shareholders for Dividend $400000 (debit)

Bank$400000 (credit)

Explanation:

Date of Declaration

On date of declaring a dividend, Green Day Corporation creates a present legal obligation to its Shareholders for the payment of dividends. Hence a Liability - Shareholders for Dividends mus be recognized.

Date of Distribution

On the day of distribution the Assets of Cash are declining to reflect outflow of economic benefit and the Shareholders for Dividends liability is decreasing to reflect the settlement of the liability.