Vienna Corporation has 31000 shares of 40 par common stock o

Vienna Corporation has 31,000 shares of $40 par common stock outstanding. On June 8, Vienna Corporation declared a 4% stock dividend to be issued August 12 to stockholders of record on July 13. The market price of the stock was $47 per share on June 8.

Journalize the entries required on June 8, July 13, and August 12. For a compound transaction, if an amount box does not require an entry, leave it blank. If no entry is required, select \"No Entry Required\" and leave the amount boxes blank.

Solution

Journal entries.

June 8

Reserve $ surplus A/c / P&L appropriation A/c Dr $ 49600

To 4% Share dividend A/c $49600

(Being dividend declared)

Note : as dividend is declared on 8 june so as on accrual basis transaction should record on june 8. Dividend calculated on 40 $ per share & not on $ 47 prevailing on june 8 because maket value is ir-relevant in dividend calculation hence paid on face value

Calculation of dividend value is :

Share outstanding =31000

Par value =40 $ per share

Hence 4% share dividend =31000*40*4%

=$49600

July 13 =no entry

Aug 12, 4% share dividend A/c Dr. $49600

To bank A/c $49600

( Being share dividend paid)