ExpertMedium1 markMultiple Choice
CPA · Question 33 · Area II: Balance Sheet Accounts
A company declares a 15% stock dividend when the market price is $30 and par value is $10. There are 10,000 shares outstanding. <br/><br/>What is the debit to Retained Earnings?
A company declares a 15% stock dividend when the market price is $30 and par value is $10. There are 10,000 shares outstanding. <br/><br/>What is the debit to Retained Earnings?
Answer options:
A.
$15,000
B.
$30,000
C.
$45,000
D.
$0
How to approach this question
Small Stock Dividend (<20-25%): Debit RE for Market Value. <br/>Large Stock Dividend (>25%): Debit RE for Par Value.
Full Answer
C.$45,000✓ Correct
Shares issued = 10,000 * 15% = 1,500.<br/>Small dividend rule: Use Market Value.<br/>Debit RE = 1,500 shares * $30 = $45,000.
Common mistakes
Using par value for a small stock dividend.
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