Nike has 700000 authorized shares of 2 par value common stoc

Nike has 700,000 authorized shares of $2 par value common stock. The company issued 450,000 shares and has additional paid-in capital-in-excess of par value of $1,600,000. The company does not have any treasury stock. North Bend Co. declared a 15 percent stock dividend when the stock was selling for $10 per share. By how much should the Additional Paid-in-Capital account increase as a result of the stock dividend:

Solution

The Journal Entry to record dividend will be ;

Particulars

Debit

Credit

Retained Earnings

(450,000 x 15% x $10)

$675000

       Common stock dividend distributable

       (450,000 x 15% x $2)

$135000

       Paid in capital in excess of par value,

       common stock

       (450,000 x 15% x $8)

$540,000

(For recording Declaration of 15% stock dividend)

So additional paid in capital will increase by $540,000 as result of stock dividend