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Ayayai Corporation has outstanding 400,000 shares of $10 par value common stock. The corporation declares a 100% stock dividend when the fair value of the stock is $63 per share. Prepare the journal entries for both the date of declaration and the date of distribution. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

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Answer:

Explanation:

The journal entries are shown below:

On Declaration date

Retained Earnings A/c Dr $4,000,000         (400,000 shares × $10)

        To Common Stock Dividend Distributable A/c $4,000,000        

(Being dividend is declared)

On distribution date:

Common Stock Dividend Distributable A/c Dr $4,000,000    

           To Common Stock A/c $4,000,000    

(Being the dividend is distributed)

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