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Stock Dividends
Companies can pay dividends in the form of additional shares if they wish to conserve cash but still payout a portion of profits to shareholders.
Things to know
- Increasesthe number of outstanding shares anddecreasesthe market price per share.
- Expressed as a percentage of existing shares
- Small stock dividend: 25% is recorded at the market price on the date of declaration.
- Large stock dividend: 25% is recorded at the average issue price of existing shares.
- Liability used to record is called Stock dividends to be issued or Stock dividends distributable
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Example: Stock Dividends
The following excerpt from Browns Inc.'s statement of financial position is available:
On February 11th, 2020 the company declared a 35% stock dividend on its existing common shares payable to the shareholders of record on March 7th. On April 1st the dividends were paid. The market price per share was $45 on February 11th and $41 on April 1st.
Prepare all necessary journal entries related to these dividends.
Journal entry record the declaration of the stock dividends
Journal entry to record the distribution of the stock dividends
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Example: Stock Dividends
The following excerpt from Browns Inc.'s statement of financial position is available:
On February 11th, 2020 the company declared a 12% stock dividend on its existing common shares payable to the shareholders of record on March 7th. On April 1st the dividends were paid. The market price per share was $45 on February 11th and $41 on April 1st.
Prepare all necessary journal entries related to these dividends.
Journal entry record the declaration of the stock dividends
Journal entry to record the distribution of the stock dividends
Practice: Stock Dividends
On April 19th, 2020 ABC Inc. declared that on May 17th it will pay a 15% stock dividend to its existing common shares. The market price per share on April 19th was $27.80 and had decreased to $19.87 by May 17th when the dividends were paid.
Use the following information to prepare all necessary journal entries.
Prepare the journal to record the declaration of the dividends
Transactions:
| Account | Debit | Credit |
|---|---|---|
Practice: Stock Dividends
On April 19th, 2020 ABC Inc. declared that on May 17th it will pay a 45% stock dividend to its existing common shares. The market price per share on April 19th was $27.80 and had decreased to $19.87 by May 17th when the dividends were paid.
Use the following information to prepare all necessary journal entries.
Prepare the journal to record the declaration of the dividends
Transactions:
| Account | Debit | Credit |
|---|---|---|