Question

Green Day Corporation has outstanding 400,000 shares of \(10 par value common stock. The corporation declares a 5% stock dividend when the fair value of the stock is \)65 per share. Prepare the journal entries for Green Day Corporation for both the date of declaration and the date of distribution.

Short answer

The total dividend distributed by Green Day Corporation is $200,000.

Step-by-step solution

Meaning of Common Stock

The security that symbolizes possession in a company is known as common stock. Unusual shareholders do not accompany the board of administrators and do not participate in enterprise decision-making.

Preparing Journal Entries   

Date	Particular	Debit ($)	Credit ($)
Declaration Date
	Retained Earnings A/c	1,300,000
	Common Stock Dividend Distributable A/c		200,000
	Paid-in Capital in excess of par common stock A/c		1,100,000
	To record the payment of dividend
DistributionDate
	Common Stock Dividend Distributable A/c	200,000
	Common Stock A/c		200,000
	To record the payment of dividend