Recording a Stock Dividend?
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PharmGen, a pharmaceutical company, was founded two years ago. Like most pharmaceutical campanies, PharmGen did not make any profits in its first two years of operations since the company spent heavily on research and development to create new drugs. However, in order to continue to attract investors, the company would like to issue a 5% stock dividend this year.
PharmGen currently has 15000 shares of common stock, and no preferred stock outstanding. The stock, which has a par value of $2.00, was initially issued at $12 per share. Currently, the stock is trading at $20 per share.
What journal entry must PharmGen use to record this 5% stock dividend
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Solution Summary
This solution illustrates how to journalize a stock dividend.
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When a stock dividend of less than 25 percent of the outstanding shares is issued, the dividend is valued at the market value of the stock issued. Thus,
Retained ...
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